Figure 7-1 Yo Department Store incurred $4,000 of indirect advertising costs for its operations.The following data has been collected for 2011 for its three departments:

- Refer to Figure 7-1.How much of the indirect advertising costs will be allocated to the Shoes Department if newspaper ad space is the activity driver?

Question

Figure 7-1 Yo Department Store incurred $4,000 of indirect advertising costs for its operations.The following data has been collected for 2011 for its three departments:

- Refer to Figure 7-1.How much of the indirect advertising costs will be allocated to the Shoes Department if newspaper ad space is the activity driver?

Quizplus · Accepted Answer

To allocate indirect advertising costs using the activity-based costing method, the total cost is multiplied by the activity usage rate for each department. In this case, the Shoes Department used 62% of the newspaper ad space, which means it should be allocated 62% of the $4,000 indirect advertising costs. Therefore, $4,000 x 62% = $2,480 should be allocated to the Shoes Department.

Figure 7-1 Yo Department Store Incurred $4,000 of Indirect Advertising