Question 1

Julia Company allocates its indirect advertising expenses based on each department's gross sales.If the men's apparel department has gross sales of $200,000 out of a total of $2,000,000 in gross sales,what fraction would Julia use to allocate its indirect advertising expenses?

Accepted Answer

To find the fraction of indirect advertising expenses allocated to the men's apparel department, we need to divide the gross sales of the men's apparel department by the total gross sales of all departments.

Fraction = Men's Apparel Gross Sales / Total Gross Sales 
Fraction = $200,000 / $2,000,000 
Fraction = 1/10

Therefore, Julia would allocate 1/10 or 0.1 of its indirect advertising expenses to the men's apparel department. The answer is B.

Question 2

Of two departments,the men's department has 8,000 square feet and the women's department has 22,000 square feet.Depreciation is divided by square footage.If total depreciation is $50,000,the total amount allocated to the men's department would be approximately $36,667.

Accepted Answer

The men's department would be allocated $12,500, calculated as (8,000 / 30,000) * $50,000.

Question 3

A direct expense should be traceable to a respective department.

Accepted Answer

A direct expense is a cost that can be directly traced to a specific department or cost center within an organization. Examples include wages and salaries of employees working in a specific department, the cost of raw materials used to produce a particular product or service, and equipment rental fees for a specific project or department.

Question 4

A building's depreciation would be considered an indirect expense.

Accepted Answer

Depreciation is a non-cash expense that is charged over the useful life of an asset. It is an indirect expense since it cannot be directly traced to the production or sale of a specific product or service. Instead, it is spread out over time and allocated to different periods.

Question 5

Indirect expenses are normally:

Accepted Answer

Indirect expenses are normally subjective and approximate because they cannot be directly assigned to a specific cost object.

Question 6

A common way to apportion janitorial expense is to base it on square footage.

Accepted Answer

Apportioning janitorial expense based on square footage is a common and practical way to allocate the cost among different areas or tenants in a building.

Question 7

Indirect expenses may be allocated to departments based on the cost of goods sold in each department.

Accepted Answer

This is a common method of allocating indirect expenses, as the cost of goods sold is a reflection of the department's level of activity and therefore usage of indirect resources.

Question 8

If gross sales for the tools department are $500,000 and gross sales for the appliances department are $300,000,what is the fraction used to apportion the indirect advertising for the appliances department if it is based on gross sales?

Accepted Answer

To find the fraction used to apportion the indirect advertising, we need to find the total gross sales for both departments. Total gross sales = $500,000 + $300,000 = $800,000. 
Now, we can find the fraction for the appliances department by dividing the gross sales of appliances by the total gross sales. 
Fraction for appliances department = Gross sales for appliances department/Total gross sales 
= $300,000/$800,000 
= 3/8 
Therefore, the fraction used to apportion the indirect advertising for the appliances department is 3/8.

Question 9

Direct expenses,such as salaries,can be traced to a particular department.

Accepted Answer

Direct expenses are those expenses that can be specifically associated with a particular department or cost center, such as salaries, raw materials, and rent for a specific facility.

Question 10

The candy department experienced the following revenue and expenses during October:
$$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 13,500 \
\hline \text { Cost of Goods Sold } & 7,600 \
\hline \text { Direct Operating Expenses } & 1,000 \
\hline \text { Indirect Operating Expenses } & 700 \
\hline
\end{array}$$
The candy departmental net income is:

Accepted Answer

The net income is calculated as Sales - Cost of Goods Sold - Direct Operating Expenses - Indirect Operating Expenses = $13,500 - $7,600 - $1,000 - $700 = $4,200.

Question 11

Carla's building expenses,which are indirect,are based on each department's square footage.Department A occupies 35,000 square feet.Department B occupies 55,000 square feet,and Department C occupies 10,000 square feet.If the building expenses total $250,000,how much is allocated to Department B?

Accepted Answer

The total square footage of the building is 35,000 + 55,000 + 10,000 = 100,000. 
To find the percentage of the building that Department B occupies, divide the square footage of Department B by the total square footage of the building: 55,000 ÷ 100,000 = 0.55 or 55%. 
Then, multiply this percentage by the total building expenses: 0.55 × $250,000 = $137,500. 
Therefore, the amount allocated to Department B is $137,500.

Question 12

Departmental accounting requires:

Accepted Answer

Departmental accounting requires measuring departmental gross profit (A) by recording revenues and deducting direct costs, as well as allocating indirect costs to departments (C) to accurately determine their profits or losses. It also involves allocating direct costs to departments (B) to ensure that each department's expenses are appropriately accounted for in relation to the goods or services it produces. Therefore, both A and C are correct.

Question 13

Which allocation base is best used to allocate advertising expense by selling department?

Accepted Answer

Allocating advertising expense based on the gross sales of each department as a percent of total gross sales is the best choice as it directly correlates advertising expense with the department's revenue generation. This method also incentivizes departments to increase their sales and contribute to the overall company revenue.

Question 14

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

Accepted Answer

The answer of Sports apparel department's gross profit is $300,000;clothing...

Question 15

The photography department in a department store experienced the following revenue and expenses during October:
$$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 6,500 \
\hline \text { Cost of Goods Sold } & 2,000 \
\hline \text { Direct Operating Expenses } & 200 \
\hline \text { Indirect Operating Expenses } & 800 \
\hline
\end{array}$$
The photography departmental net income is:

Accepted Answer

The answer of The photography department in a department store...

Question 16

Which of the following expenses is the most difficult to allocate to departments?

Accepted Answer

Use of general supplies by everyone is a common expense that cannot be attributed to any specific department, making it difficult to allocate.

Question 17

Indirect expenses are not the same across departments and industries.

Accepted Answer

Indirect expenses, such as overhead costs, can vary depending on the department and industry. For example, the overhead costs for a manufacturing department may differ from those of a marketing department. Similarly, the indirect expenses of a healthcare industry may differ from those of a retail industry.

Question 18

Which allocation base is best used to allocate building depreciation?

Accepted Answer

Square feet of space used is the best choice for allocating building depreciation as it directly relates to the wear and tear on the building. The more square footage a department uses, the more wear and tear it will create, therefore, it is a logical method for allocating building depreciation.

Question 19

Indirect expenses are subjective in nature and may be allocated in a number of ways.

Accepted Answer

Indirect expenses are not easily traceable to a specific product or service and can be allocated in different ways based on the company's accounting policies and methods. As a result, they are subjective in nature.

Question 20

Calculate the costume jewelry department net income given the following:
$$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 1,450 \
\hline \text { Direct operating expenses } & 300 \
\hline \text { Indirect operating expenses } & 250 \
\hline \text { Cost of goods sold } & 600 \
\hline
\end{array}$$

Accepted Answer

The answer of Calculate the costume jewelry department net income...

Quiz 24: Departmental Accounting