Burien, Inc Burien Allocates Building Depreciation, Maintenance, and Utilities on the Basis

question 134

Essay

Burien, Inc.operates a retail store with two departments, A and B.Its departmental income statement for the current year follows:
$\begin{array}{c} \text {BURIEN, INC. }\\ \text { Departmental Income Statement }\\ \text { For Year Ended December 31 }\\\begin{array}{lrrr}& \underline { \text { Dept. A }}& \underline { \text { Dept. B }}& \underline { \text { Combined }} \\ \text { Sales } &\$ 180,000 & \$ 200,000 & \$ 380,000 \\ \text { Direct expenses } &\underline{129,900 }& \underline{142,870} & \underline{272,770}\\ \text {Contributions to overhead}&\underline{\$ 50,100}&\underline{ 57,130}& \underline{\$ 107,230}\\\text { Indirect expenses: }\\\text { Depreciation--building } & 10,000 & 11,760 & 21,760 \\\text { Maintenance } & 1,600 & 1,700 & 3,300 \\\text { Utilities } & 6,200 & 6,320 & 12,520 \\\text { Office expenses } & \underline{1,800} & \underline{2,000} & \underline{3,800}\\\text { Total indirect expenses } &\underline{\$ 19,600}&\underline{\$ 21,780}&\underline{\$ 41,380}\\\text { Net income } &\underline{\$ 30,500} & \underline{\$ 35,350} &\underline {\$ 65.850}\end{array}\end{array}$

Burien allocates building depreciation, maintenance, and utilities on the basis of square footage.Office expenses are allocated on the basis of sales.
Management is considering an expansion to a three-department operation.The proposed Department C would generate $120,000 in additional sales and have a 17.5% contribution to overhead.The company owns its building.Opening Department C would redistribute the square footage to each department as follows: A, 19,040; B, 21,760 sq.ft.; C, 13,600.Increases in indirect expenses would include: maintenance, $500; utilities, $3,800; and office expenses, $1,200.
Complete the following departmental income statements, showing projected results of operations for the three sales departments.(Round amounts to the nearest whole dollar.)
$\begin{array}{lllrl}& \underline { \text { Dept. A }}& \underline { \text { Dept. B }}& \underline { \text { Dept. C }}& \underline { \text { Combined }} \\\text { Sales } &\$ 180,000 & \$ 200,000 &\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad } \\&&&-\\\text { Direct expenses } &\underline {129,900} & \underline {142,870} &\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }\\&&&-\\\text { Contributions to overhead } &\$ 50,100 & \$ 57,130 &\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }\\&&&-\\\text { Indirect expenses } &\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }\\&&&-\\\text { Depreciation-building } &\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }\\&&&-\\\text { Maintenance } &\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }\\&&&-\\\text { Utilities } &\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }\\&&&-\\\text { Office expenses } &\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }\\&&&-\\\text { Total indirect expenses } &\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }\\\text { Net income } &\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }&\underline { \quad\quad \quad \quad }\\\end{array}$

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