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Lillard’s Sports Store has three operating departments, and it conducts advertising that benefits all departments. Advertising costs are $200,000. Sales for its operating departments are in the table below. How much advertising cost is allocated to Department 1 if the allocation is based on departmental sales? Department Sales1 $ 440,0002 800,0003 360,000Multiple Choice$55,000.$45,000.$100,000.$90,000.$110,000.

Question

Lillard’s Sports Store has three operating departments, and it conducts advertising that benefits all departments. Advertising costs are 200,000.Salesforitsoperatingdepartmentsareinthetablebelow.HowmuchadvertisingcostisallocatedtoDepartment1iftheallocationisbasedondepartmentalsales? DepartmentSales1200,000. Sales for its operating departments are in the table below. How much advertising cost is allocated to Department 1 if the allocation is based on departmental sales? Department Sales1 440,0002 800,0003 360,000Multiple Choice55,000.55,000.45,000.100,000.100,000.90,000.$110,000.

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Solution

To allocate the advertising cost based on departmental sales, we first need to find the total sales of all departments.

Step 1: Add up all the sales 440,000(Department1)+440,000 (Department 1) + 800,000 (Department 2) + 360,000(Department3)=360,000 (Department 3) = 1,600,000 (Total Sales)

Step 2: Find the proportion of Department 1's sales to the total sales 440,000(Department1)/440,000 (Department 1) / 1,600,000 (Total Sales) = 0.275

Step 3: Multiply the total advertising cost by the proportion of Department 1's sales to find the amount of advertising cost allocated to Department 1 200,000(TotalAdvertisingCost)0.275=200,000 (Total Advertising Cost) * 0.275 = 55,000

So, $55,000 of the advertising cost is allocated to Department 1.

This problem has been solved

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