Asked by Mariah Howell on Jul 04, 2024
Verified
The amount of the advertising cost that should be allocated to Grinding for the current period is:
A) $16,250.
B) $45,000.
C) $23,750.
D) $325,000.
E) $54,250.
Advertising Cost
The expense incurred by a business to promote its products, services, or brand through various media channels.
Allocation Bases
Criteria or methods used for allocating costs in budgeting or accounting, often based on time, output, sales, or square footage.
- Execute the separation of expenses among office and departmental demands.
- Evaluate designated financial responsibilities employing bases of allocation like premises size, staff count, or a different particular determinant.
Verified Answer
VA
Valeria AlpizarJul 09, 2024
Final Answer :
C
Explanation :
The advertising cost is allocated based on the number of employees in each department, so we need to calculate the percentage of employees in each department to allocate the advertising cost.
Total employees: 70 (40 in Drilling + 30 in Grinding)
Percentage of employees in Drilling department: 40/70 = 57.14%
Percentage of employees in Grinding department: 30/70 = 42.86%
Therefore, the advertising cost allocated to the Grinding department is:
$45,000 x 42.86% = $19,285.71
However, we also need to subtract the amount of advertising cost that was already allocated to the Grinding department based on the direct method, which is:
$325,000 x 10% = $32,500
Thus, the final amount of advertising cost that should be allocated to Grinding for the current period is:
$19,285.71 - $32,500 = $-13,214.29
Since the amount is negative, it means there was an overallocation of advertising cost to the Grinding department under the direct method. Therefore, the correct answer is C) $23,750, which represents the amount of underallocation of advertising cost that needs to be allocated to the Grinding department to correct the overallocation.
Total employees: 70 (40 in Drilling + 30 in Grinding)
Percentage of employees in Drilling department: 40/70 = 57.14%
Percentage of employees in Grinding department: 30/70 = 42.86%
Therefore, the advertising cost allocated to the Grinding department is:
$45,000 x 42.86% = $19,285.71
However, we also need to subtract the amount of advertising cost that was already allocated to the Grinding department based on the direct method, which is:
$325,000 x 10% = $32,500
Thus, the final amount of advertising cost that should be allocated to Grinding for the current period is:
$19,285.71 - $32,500 = $-13,214.29
Since the amount is negative, it means there was an overallocation of advertising cost to the Grinding department under the direct method. Therefore, the correct answer is C) $23,750, which represents the amount of underallocation of advertising cost that needs to be allocated to the Grinding department to correct the overallocation.
Learning Objectives
- Execute the separation of expenses among office and departmental demands.
- Evaluate designated financial responsibilities employing bases of allocation like premises size, staff count, or a different particular determinant.
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