Adel Department Store incurred $8000 of indirect advertising costs for its operations. The following data were collected for its three departments:
How much of the indirect advertising costs would have been allocated to the Shoe Department if newspaper ad space were the allocation base?
A) $4340
B) $4960
C) $5600
D) $7000

Question

Adel Department Store incurred $8000 of indirect advertising costs for its operations. The following data were collected for its three departments:
 How much of the indirect advertising costs would have been allocated to the Shoe Department if newspaper ad space were the allocation base?
A) $4340 
B) $4960 
C) $5600 
D) $7000

Quizplus · Accepted Answer

To allocate indirect advertising costs using newspaper ad space as the allocation base, we need to determine the percentage of newspaper ad space used by each department. This can be calculated by dividing each department's newspaper ad space by the total newspaper ad space used by all three departments:

Shoe Department: $2400 ÷ $8000 = 30%
Clothing Department: $3200 ÷ $8000 = 40%
Home Department: $2400 ÷ $8000 = 30%

Next, we need to allocate the $8000 of indirect advertising costs based on these percentages:

Shoe Department: 30% x $8000 = $2400

Therefore, $2400 of the indirect advertising costs would have been allocated to the Shoe Department if newspaper ad space were the allocation base, making choice B the correct answer.

Adel Department Store Incurred $8000 of Indirect Advertising Costs for Its