A company incurs advertising costs of $10,000. The company's three selling departments have the following sales: Department 1—$10,000; Department 2—$30,000; Department 3—$40,000. Advertising is allocated based on percent of sales. The amount of advertising allocated to Department 3 will be $.
Question
A company incurs advertising costs of 10,000; Department 2—40,000. Advertising is allocated based on percent of sales. The amount of advertising allocated to Department 3 will be $.
Solution 1
To calculate the amount of advertising allocated to Department 3, we first need to find the total sales of all departments.
Step 1: Calculate total sales Total sales = Department 1 sales + Department 2 sales + Department 3 sales Total sales = 30,000 + 80,000
Step 2: Calculate the percentage of total sales that Department 3 is responsible for Percentage of total sales for Department 3 = (Department 3 sales / Total sales) * 100 Percentage of total sales for Department 3 = (80,000) * 100 = 50%
Step 3: Calculate the amount of advertising allocated to Department 3 Advertising allocated to Department 3 = (Percentage of total sales for Department 3 / 100) * Total advertising costs Advertising allocated to Department 3 = (50 / 100) * 5,000
So, the amount of advertising allocated to Department 3 is $5,000.
Solution 2
To calculate the amount of advertising allocated to Department 3, we first need to find the total sales of all departments.
Step 1: Add up all the sales 30,000 (Department 2) + 80,000 (Total Sales)
Step 2: Calculate the percentage of total sales that Department 3 is responsible for 80,000 (Total Sales) = 0.5 or 50%
Step 3: Multiply the total advertising costs by the percentage of sales Department 3 is responsible for 5,000
So, the amount of advertising allocated to Department 3 is $5,000.
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