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Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period:
Office Expenses Total Allocation Basis
Salaries $31,000​ Number of employees
Depreciation 20,500​ Cost of goods sold
Advertising 41,500​ Net sales
Item Drilling Grinding Total
Number of employees 1080​ 1620​ 2700​
Net sales $326,625​ 477,375​ $804,000​
Cost of goods sold $76,500​ 127,500​ $204,000​
The amount of the total office expenses that should be allocated to Grinding for the current period is:________.
a. $71,600.
b. $43,160.
c. $109,000.
d. $600,000.
e. $53,000.

Respuesta :

akiran007

Answer:

Total Expenses        $ 56,053.13      

Explanation:

Marks Corporation

Office Expenses           Total               Allocation Basis

Salaries                       $31,000​              Number of employees

Depreciation                20,500​              Cost of goods sold

Advertising                   41,500​                     Net sales

              Item                   Drilling                 Grinding             Total

Number of employees        1080​                   1620​                  2700​

Cost of goods sold          $76,500​               127,500​            $204,000​

Net sales                        $326,625​               477,375​           $804,000​

We calculate the expenses for the Grinding using ABC. This is done by taking the ratio of the allocation basis of the grinding with the total and multiplying it with the corresponding expense.

Office Expenses           Total               Grinding

Salaries                       $31,000​             (1620/2700)*  $31,000​

                                                                   = $ 18600

Depreciation                20,500​            (​127,500​ /$204,000 )20,500

                                                                     =12812.5

Advertising                   41,500​               (477,375/ $804,000)  41,500

                                                                    ​=    24640.63                          

Total Expenses                                           $ 56,053.13                    

 

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