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ALLOCATING OPERATING EXPENSE—RELATIVE NET SALES Amelia Diaz owns a sporting goods store. She has divided her store into three departments. Net sales for the month of July are as follows: Advertising expense for July was $5,000. Allocate the advertising expense among the three departments on the basis of relative net sales.

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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
Publisher: Cengage Learning,
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
Publisher: Cengage Learning,
ISBN: 9781337794756
Chapter 25, Problem 3SEB
Textbook Problem
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ALLOCATING OPERATING EXPENSE—RELATIVE NET SALES Amelia Diaz owns a sporting goods store. She has divided her store into three departments. Net sales for the month of July are as follows:

Chapter 25, Problem 3SEB, ALLOCATING OPERATING EXPENSERELATIVE NET SALES Amelia Diaz owns a sporting goods store. She has

Advertising expense for July was $5,000.

Allocate the advertising expense among the three departments on the basis of relative net sales.

To determine

Compute the amount of advertising expense allocated to the departments, based on sales value.

Explanation of Solution

Indirect expenses: The expenses that are not directly related to the operations of one department alone, or related to joint or associated departments, are referred to as indirect expenses.

Compute the amount of advertising expense allocated to each of the departments, based on sales value.

DepartmentsSalesPercentage of Total Sales×Advertising Expense=Allocated Cost
Football$10,000$10,000/$25,000=40%

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Chapter 25 Solutions

College Accounting, Chapters 1-27
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