AC2720 Wk4 Exercise 1 - Problem 1 Part 1 Direct and...

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Problem 1 Direct and step-down allocation Part 1:
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Problem 2 Allocation of common costs
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Problem 3 Allocation of c Part 1 a: Davenport’s method based on number of cars sold: Sales Location Percentage (1) (2) (3) = (2) ÷ units East 4620 0.33 West 1120 0.08 North 3220 0.23 South 5040 0.36 Part 1 b: Stand-alone method Sales Location Percentage (1) (2) (3) = (2) ÷ units East 261600 0.12 West 392400 0.18 North 697600 0.32 South 828400 0.38 Part 1 c: Incremental method (locations ranked in order of largest advertising dollars to smallest adv Sales Location Allocated Cost East 828400 871600 West 697600 174000 North 17400 South Part 2: East West North Cars Sold $ 561,000.00 $ 136,000.00 $ 391,000.00 Number of cars sold Stand Alone Cost Cost Remaining to Allocate
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Stand-alone $ 204,000.00 $
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Unformatted text preview: 306,000.00 $ 544,000.00 Incremental $ - $ 174,000.00 $ 697,600.00 From the above summary, we can see that south locaTon has to bear the highest amount of adver borne a single penny under incremental allocaTon method. ±herefore, Stand-alone method seems to be the ideal method for allocaTon of adverTsing costs. common costs Joint Cost Allocation (4) (5) = (3) × (4) 1700000 561000 1700000 136000 1700000 391000 1700000 612000 Joint Cost Allocation (4) (5) = (3) × (4) 1700000 204000 1700000 306000 1700000 544000 1700000 646000 verTsing dollars): South $ 612,000.00 $ 646,000.00 $ 828,400.00 rTsement costs in any of the three methods. Whereas, East locaTon do not...
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