Super Grocery store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments: Expense Basis for allocation Amount Administrative Square feet of floor space $ 34,000 Advertising Amount of dollar sales $ 27,000 The following information is available for its three operating (sales) departments: Department Square Feet Dollar Sales Produce 1,470 $ 99,000 Bakery 980 $ 49,000 Meats 2,450 $ 61,000 Totals 4,900 $ 209,000 What is the total administrative expense allocated to the Meats department?

$17,000

Explanation:

Using the floor spacing occupied by each department as the basis for the allocation of the administrative expense. In other words, the bigger the square feet occupied, the bigger the total administrative expense to be allocated.

Given

Department       Square Feet       Dollar Sales

Produce                 1,470                  $ 99,000

Bakery                      980                 $ 49,000

Meats                     2,450                 $ 61,000

Totals                     4,900               $ 209,000

And the Amount Administrative Square feet of floor space $ 34,000

Then the administrative cost allocated to the meat department

= (2450/4900) * $ 34,000

= $17,000

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