Question

QS 22-8 Rent expense allocated to departments LO P2 A retailer pays $140,000 rent each year for its two-story building. The space in this building is occupied by five departments as specified here. points eBook Hint Jewelry department Cosmetics department Housewares department Tools department Shoes department 1,575 square feet of first-floor space 2,925 square feet of first-floor space 1.935 square feet of second-floor space 720 square feet of second-floor space 1,845 square feet of second-floor space Print References The company allocates 70% of total rent expense to the first floor and 30% 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.

Answer 1

Ans.		Amount Allocated	% of Total	Cost
	First floor	$140,000	70%	$98,000
	Second floor	$140,000	30%	$42,000
	Totals			$140,000
	*Cost   =   Amount allocated * % of Total
	First Floor	Square feet	% of Total	Allocated cost
	Jewelry Department	$1,575	35%	$34,300
	Cosmetics Department	$2,925	65%	$63,700
	Totals	$4,500		$98,000
	Second Floor	Square feet	% of Total	Allocated cost
	Housewares Department	$1,935	43%	$18,060
	Tools Department	$720	16%	$6,720
	Shoes Department	$1,845	41%	$17,220
	Totals	$4,500		$42,000
	*Explanations:
	First Floor	Square feet	% of Total	Cost
	Jewelry Department	$1,540	$1,540 / $4,400 * 100 = 35%	$98,000 * 35% = $34,300
	Cosmetics Department	$2,860	$2,860 / $4,400 * 100 = 65%	$98,000 * 35% = $63,700
	Totals	$4,400
	Second Floor	Square feet	% of Total	Allocated cost
	Housewares Department	$1,935	$1,935 / $4,500 * 100 = 43%	$42,000 * 43%
	Tools Department	$720	$720 / $4,500 * 100 = 16%	$42,000 * 16%
	Shoes Department	$1,845	$1,845 / $4,500 * 100 = 41%	$42,000 * 41%
	Totals	$4,500