Cost Allocation with Cost Flow Diagram
Coastal Computer operates two retail outlets in Oakview, one on Main Street and the other in Lakeland Mall. The stores share the use of a central accounting department. The cost of the accounting department for last year was $180,000. Following are the operating results for the two stores for the year.
|
|
Main Street |
Lakeland Mall |
|
Revenues |
$1,000,000 |
$2,000,000 |
|
Number of computers sold |
2,000 |
1,600 |
Required
a. Allocate the cost of the central accounting department to the two stores based on:
(1) Number of computers sold.
(2) Store revenue.
b. Draw a cost flow diagram to illustrate your answer to requirement (a), part (2).