The following is a partially completed lower section of a departmental expense allocation for Cozy...

Question

The following is a partially completed lower section of a departmental expense allocation for Cozy Bookstore. It reports the total amounts of direct and indirect expenses allocated to its five (5) departments. Allocate the expenses of the two service departments (advertising and purchasing) to the three operating departments and provide the complete income statement.

Advertising and purchasing department expenses are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows.

Phoenix Company’s 2019 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units.

● Classify all items listed in the fixed budget as variable or fixed.

● Also determine their amounts per unit or their amounts for the year, as appropriate.

● Identify the unit variable costs in the format of variable costing, according to your findings in part a

● Organize a template for variable costing income statements in which the sales volume is a variable.

● Test your template for 15,000 units sales volume to see if you get the same income as stated above

● Find the breakeven point and provide the income statement at break even

● Provide income statement at sales volume 12,000, 14,000, 16,000, and 18,000

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Khushboo · Accepted Answer

Sheet1
					Allocation of expenses to departments
			Allocation base	Expense Account Bal	Advertising Dept	Purchasing Dept	Books Dept	Magazine Dept	Newspaper Dept
			Total department expense	698,000	24,000	34,000	425,000	90,000	125,000
			Service department expenses
			Advertising department- sales		(24,000)		13,200	5,280	5,520
			Purchasing dept- Purchase orders			(34,000)	14,620	10,200	9,180
			Total expenses allocated to operating departments		- 0	- 0	452,820	105,480	139,700
Sheet2
		Classification of items
		Particulars	Variable	Fixed
		Direct materials	975,000
		Direct labour	225,000
		Machinery repairs	60,000
		Depreciation- plant equipment		300,000
		Utilities	45,000	150,000
		Plant management salaries		200,000
		Packaging	75,000
		Shipping	105,000
		Salaes salary		250,000
		Advertising expenses		125,000
		Salaries		241,000
		Entertainment expenses		90,000
		Bifurcation of amount
		Particulars	Amount per unit	Amount for the year
		Direct materials	65.00
		Direct labour	15.00
		Machinery repairs	4.00
		Depreciation- plant equipment		300,000
		Utilities	3.00	150,000
		Plant management salaries		200,000
		Packaging	5.00
		Shipping	7.00
		Salaes salary		250,

The following is a partially completed lower section of a departmental expense allocation for Cozy Bookstore. It reports the total amounts of direct and indirect expenses allocated to its five (5)...

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