Problem #2 Chapter 9 Performance Measurement and Responsibility Accounting

Advertising and purchasing department expenses of Cozy Bookstore are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows.

Complete the following table by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments.

	Direct Expenses	Sales	Purchase Orders
Advertising	$36,000
Purchasing	$54,000
Books	360,000	$450,000	240
Magazines	130,000	$180,000	240
Newspapers	160,000	$270,000	120
Total	$740,000	$900,000	600

	Totals	Advertising	Purchasing	Books	Magazines	Newspaper
Direct expense	$740,000	36,000	$54,000	$360,000	$130,000	$160,000
Service Dept. exps.
Advertising
Purchasing
Totals	$740,000