Posted by Tootsie on .
1) If the Cost were split simply 50-50- than allocated expense would be -
Advertising Expenses - $ 2.5 M for each business and
warehouse expenses - $ 1.5 M for each business
2) As per my view the Advertisement expenses should be allocated in the ratio of sales (150:20) and warehouse expenses should be allocated on the basis of use of floor area (75:25) and according to that - (i) Advertisement expenses- $4.41M would be allocated to unicycle business and balance $0.59M to bicycle business.
(ii) Warehouse expenses- $2.25M would be allocated to unicycle business and balance $0.75M to bicycle business.
3) Too many and less value expenses should be allocated on the basis of sale value.