Theory question 109
Departmental AccountsAbike is the proprietress of a shop which operates two departments A and B. The following balances were presented for the period ended 31st March, 2008. (D)
Sales: Department A Cr 150,000; Department B Cr 100,000
Stocks 1/4/07: Department A 2,500; Department B 2,000
Purchases: Department A 118,000; Department B 82,000
Wages of sales assistants: Department A 10,000; Department B 7,500
Sales commission: Department A 1,500
Office salaries 7,500
Rates 1,300
Insurance 500
Electricity 1,200
Repairs to premises 250
Telephone charges 250
Cleaning 300
Accountancy fees 1,200
Office expenses 600
Stock 31/3/08: Department A 3,000; Department B 1,500
Additional information:
(i) The portion of total floor area occupied by each department was: Department A 1/5; Department B 4/5
(ii) Apportionment of overhead is to be made as follows: Area: rates, insurance, electricity, repairs, telephone and cleaning; Turnover: office salaries, accountancy fees and office expenses.
You are required to prepare Departmental Trading, Profit and Loss Account for the year ended 31st March, 2008. Note: Total columns are not required.
Show the model answer
Bases: area A 1/5, B 4/5; turnover 150,000 : 100,000 = 3 : 2
Trading (A / B): sales 150,000 / 100,000; opening stock 2,500 / 2,000 + purchases 118,000 / 82,000 − closing stock 3,000 / 1,500 = cost of sales 117,500 / 82,500; gross profit D32,500 / D17,500
Expenses (A / B): wages of sales assistants 10,000 / 7,500; sales commission 1,500 / –; office salaries 4,500 / 3,000; rates 260 / 1,040; insurance 100 / 400; electricity 240 / 960; repairs 50 / 200; telephone 50 / 200; cleaning 60 / 240; accountancy fees 720 / 480; office expenses 360 / 240
Total expenses D17,840 / D14,260
Net profit: A D14,660; B D3,260
Split area costs 1:4 and turnover costs 3:2; direct wages and commission go straight to their department.