Sports apparel department's gross profit is $300,000; clothing department gross profit is $200,000; indirect advertising expense is $6,000.Indirect expense charged to the sports apparel department based on gross profit would be $3,600.

Question

Quizplus · Accepted Answer

To calculate the indirect expense charged to the sports apparel department, we need to use the formula:

Indirect expense = (gross profit / total gross profit) x indirect advertising expense

Total gross profit = gross profit of sports apparel department + gross profit of clothing department
Total gross profit = $300,000 + $200,000
Total gross profit = $500,000

Indirect expense charged to sports apparel department = ($300,000 / $500,000) x $6,000
Indirect expense charged to sports apparel department = 0.6 x $6,000
Indirect expense charged to sports apparel department = $3,600

Therefore, the answer is A - True.

Sports Apparel Department's Gross Profit Is $300,000; Clothing Department Gross