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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.
College Accounting, Chapters 1-27
Solutions
College Accounting, Chapters 1-27
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.
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.
| Departments | Sales | Percentage of Total Sales | × | Advertising Expense | = | Allocated Cost |
| Football | $10,000 |
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