Monday Company has two departments.Relevant information is presented below:
$\begin{array}{lll}&\text { Department } 1&\text { Department } 2\
\text { Budgeted total assets } & \$ 500,000 & \$ 200,000 \
\text { Actual total assets } & \$ 600,000 & \$ 400,000 \
\text { Budgeted sales } & \$ 400,000 & \$ 2,000,000 \
\text { Actual sales } & \$ 200,000 & \$ 2,100,000
\end{array}$
Total company-wide advertising costs are $360,000.The advertising costs are allocated based on sales using the preferred approach.What amount of advertising costs is allocated to Department 2?
A) $37,500
B) $50,000
C) $262,500
D) $300,000

Question

Quizplus · Accepted Answer

The preferred approach allocates costs based on actual sales. Department 2's actual sales are $2,100,000 out of a total of $2,300,000 ($200,000 + $2,100,000). Therefore, Department 2 is allocated $360,000 * ($2,100,000 / $2,300,000) = $300,000.

Monday Company Has Two Departments Total Company-Wide Advertising Costs Are $360,000