Question

E11-3A. Assigning Traceable Fixed Expenses Selected data for Miller Company, which operates three departments, follow: Inventory......... Equipment (average cost) .... Payroll...... Square feet of floor space ......... .................. Department A $ 80,000 $720,000 $405,000 18,000 Department B $288,000 $432,000 $360,000 9,000 Department C $112,000 $288,000 $135,000 3,000 During the year, the company's fixed expenses included the following: Depreciation on equipment....... Real estate taxes ................. Personal property taxes (on inventory and equipment) Personnel department expenses .... $140,000 48,000 28,800 225,000 Assume that the property tax rate is the same for both inventory and equipment. Using the ally related bases, prepare a schedule assigning the fixed expenses to the three departments all fixed expenses are traceable to the three departments. One of these fixed costs should be a common cost and not traceable to the departments. -5 E11-4A. Return on Investment and nent. Using the most caus- three departments. Hint: Not ked costs should be considered

Answer 1

	deparment A	department B	department C	common cost
depreciation on equipment (based on average cost of equipment)	$140,000*(720,000/1,440,000)=>$70,000	$140,000*(432,000/1,440,000)=>$42,000	$140,000*(288,000/1,440,000)=>$28,000	nil
real estate taxes (based on feet of floor space)	$48,000*(18,000/30,000)=>$28,800	$48,000*(9000/30000)=>$14,400	$48,000*(3000/30000)=>$4800	nil
personal property taxes (common cost) cannot be allocated	nil	nil	nil	28,800
personnel department expenses (based on payroll)	$225,000*(405,000/900,000)=>101,250	$225,000*(360,000/900,000)=>90,000	$225,000*(135,000/900,000)=>$33,750	nil
total cost allocated	$200,050	$146,400	$65,550	28,800