Question 4 (b)
Allocation of common expenses among departments
3 marks
- Time to write
- About 6 minutes
From an older CBCS paper
Question
Question 4 (b) · 3 marksA Company has 3 Departments, whose details are as below: 3
| A Department | B Department | C Department | |
|---|---|---|---|
| Floor Area occupied | 20% | 30% | 50% |
| Sales | 1,20,000 | 2,40,000 | 3,60,000 |
| No. of Employees | 100 | 120 | 150 |
Allocate these expenses to the 3 departments:
| Rent | ₹ 96,000 |
| Lighting | ₹ 14,400 |
| Selling Expenses | ₹ 50,400 |
| Labour Welfare Expenses | ₹ 22,200 |
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
What the paper leaves open
Rent and lighting by floor area, selling expenses by sales, and labour welfare by the number of employees.
Write it in this order
- 1 Bases 1 mark 2 min
- 2 Allocation 2 marks 4 min
Try it first. About 6 minutes for 3 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Bases: rent and lighting by floor area (20: 30: 50); selling expenses by sales (1,20,000: 2,40,000: 3,60,000 = 1: 2: 3); labour welfare by the number of employees (100: 120: 150). The DU text notes that no basis of allocation is universally accepted and suggests one for each expense: rent on the floor area occupied; lighting on light points (floor area here, as no light points are given); selling expenses on sales; and salary on the time spent, so staff costs such as labour welfare go by the staff each department employs.
| Expense | Basis | Dept A (₹) | Dept B (₹) | Dept C (₹) | Total (₹) |
|---|---|---|---|---|---|
| Rent | Floor area | 19,200 | 28,800 | 48,000 | 96,000 |
| Lighting | Floor area | 2,880 | 4,320 | 7,200 | 14,400 |
| Selling expenses | Sales | 8,400 | 16,800 | 25,200 | 50,400 |
| Labour welfare | Employees | 6,000 | 7,200 | 9,000 | 22,200 |
| Total | 36,480 | 57,120 | 89,400 | 1,83,000 |
Where the 3 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Bases | 1 |
| 2 | Allocation | 2 |
| Total | 3 |
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