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QS 24-8 Rent expense allocated to departments LO P2 A retailer pays $130,000 rent each year...

QS 24-8 Rent expense allocated to departments LO P2

A retailer pays $130,000 rent each year for its two-story building. The space in this building is occupied by five departments as specified here.

Jewelry department 1,575 square feet of first-floor space
Cosmetics department 2,925 square feet of first-floor space
Housewares department 1,890 square feet of second-floor space
Tools department 855 square feet of second-floor space
Shoes department 1,755 square feet of second-floor space


The company allocates 75% of total rent expense to the first floor and 25% to the second floor, and then allocates rent expense for each floor to the departments occupying that floor on the basis of space occupied.
  
Determine the rent expense to be allocated to each department.

Amount Allocated % of Total Cost
First floor
Second floor
Totals
First Floor Sq. Feet % of Total Cost
Jewelry Dept.
Cosmetics Dept.
Totals
Second Floor Sq. Feet % of Total Cost
Housewares Dept.
Tools Dept.
Shoes Dept.
Totals
Business   Accounting   
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Homework Answers

Answer #1
Amount Allocated % of Total Cost
First floor 130000 75% 97500
Second floor 130000 25% 32500
Totals 130000
First Floor Sq. Feet % of Total Cost
Jewelry Dept. 1575 1575/4500 = 35% 97500*35% = 34125
Cosmetics Dept. 2925 2925/4500 = 65% 97500*65% = 63375
Totals 4500 100% 97500
Second Floor Sq. Feet % of Total Cost
Housewares Dept. 1890 1890/4500 = 42% 32500*42% = 13650
Tools Dept. 855 855/4500 = 19% 32500*19% = 6175
Shoes Dept. 1755 1755/4500 = 39% 32500*39% = 12675
Totals 4500 100% 32500
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