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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 ExpensesTotal Allocation BasisSalaries$30,000 Number of employeesDepreciation 20,000 Cost of goods soldAdvertising 40,000 Net sales ItemDrilling Grinding TotalNumber of employees 1,000 1,500 2,500 Net sales$325,000 $475,000 $800,000 Cost of goods sold$75,000 $125,000 $200,000 The amount of the total office expenses that should be allocated to Drilling for the current period is:

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Answer:

Marks Corporation

The amount of the total office expenses that should be allocated to Drilling for the current period is:

= $51,368

Explanation:

a) Data and Calculations:

Office Expenses  Total     Allocation Basis

Salaries           $30,000    Number of employees

Depreciation     20,000    Cost of goods sold

Advertising       40,000    Net sales

Item                                Drilling       Grinding      Total

Number of employees   1,000          1,500         2,500

Net sales                 $325,000  $475,000  $800,000

Cost of goods sold   $75,000   $125,000  $200,000

Total Expenses assigned to Drilling:

Salaries =          $12,000 ($30,000 * 1,000/2,500)

Depreciation =    12,000 ($20,000 * 75,000/125,000)

Advertising =      27,368 ($40,000 * 325,000/475,000)

Total expense  $51,368

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