The Royal Specialty Shop has two departments, Clothing and Accessories. The operating expenses for the year ending December 31 appear below.

a. Prepare a three-column statement of operating expenses with column headings: Clothing, Accessories, Total. Begin with direct departmental expenses and show a subtotal. Then continue with the allocated expenses, assigning each item to the various departments. Round all values to the nearest dollar and all percentages to one decimal place.

b. Prepare a condensed income statement with columns for Clothing, Accessories, and Total. Show the total operating expenses calculated in part a. as a single deduction from gross margin.

ROYAL SPECIALTY SHOP
Allocation Bases
Expense Bases of Allocation
Salaries---Other Gross Margin
Supplies Used (unassigned) Sales
Advertising (unassigned) Sales
Building Rent Floor Space
Payroll Taxes Salaries (including both direct and other allocated salaries)
Workers' Compensation Insurance Salaries (including both direct and other allocated salaries)
Fire Insurance Cost of Equipment and Inventory
Delivery Expense Sales
Miscellaneous Expenses (unassigned) Number ofEmployees

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Clothin Accessories Unassigned Total $78,240 $69,360 $48,000 1,400 $147,600 48,000 8,400 Supplies Used Deprediation of Equi Advertising Building Payrol Workers Compensation Insurance Fire Insurance Delivery Expense Miscellaneous Expenses 3,800 1,600 3,726 3,200 4,800 8,586 3,888 19,000 12,300 2,080 1,000 1,800 600 16,200 19,000 12,300 1,800 2,400 1,000 ROYAL SPECIALTY SHOP Allocation Base Activity Levels Accessories Total $600,000 $440,000 10,080 $100,800 2.400 10 $400,000 $240,000 24,960 $139,200 3,600 15 $1,000,000 Cost of Goods 680,000 S 35,040 240,000 Inventory (average) Floor Space (square feet) Number of Employees 6,000