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Difficulty: MediumPreparation of Departmental Trading, Profit and Loss Accounts

Zaria Enterprises operates two departments: Hardware and Softlines. For the year ended 31 December 2025, total administrative salaries of ₦120,000 are to be apportioned based on floor space occupied. Hardware occupies 800 m2800\text{ m}^2 and Softlines occupies 400 m2400\text{ m}^2. If the Softlines department recorded a gross profit of ₦250,000 and direct departmental expenses of ₦45,000, what is the net profit of the Softlines department in Naira?

Answer: 165000 ₦

Answer

The net profit of the Softlines department is ₦165,000.
The Softlines department occupies 400 sq. metres out of a total 1,200 sq. metres, representing 1/3 of the total floor space. Apportioning the ₦120,000 administrative salaries gives ₦40,000. Adding the direct expenses of ₦45,000 results in total Softlines expenses of ₦85,000. Deducting this from the gross profit of ₦250,000 yields a net profit of ₦165,000.

Step-by-Step Solution

1
Calculate the ratio for apportioning administrative salaries based on floor space.
The floor space ratio for Softlines is 400 out of 1,200 square metres, which simplifies to 1/3.
Administrative overheads shared across departments are apportioned using floor area occupied as the basis.
2
Compute the apportioned administrative salaries allocated to the Softlines department.
₦40,000.
1/3 multiplied by total administrative salaries of ₦120,000 equals ₦40,000.
3
Calculate the total expenses attributed to the Softlines department.
₦85,000.
Add direct expenses of ₦45,000 to the apportioned administrative salaries of ₦40,000.
4
Deduct total departmental expenses from departmental gross profit.
₦165,000.
Net profit is equal to gross profit minus total departmental expenses (₦250,000 - ₦85,000 = ₦165,000).

Key Concept

Apportionment of overhead expenses based on floor area and computation of departmental net profit
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Topics

Preparation of Departmental Trading, Profit and Loss Accounts

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