Required information (The folowing information applies to the questions displaye

Question

Required information (The folowing information applies to the questions displayed below) has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for the current period follow $22,500 Depreciation-Duiiding Interest Baiiding mortgage Taxes-Building and land Gas (heatingi expense Lightisg experae 10,000 3,125 3,750 Toral oeeupancy cost 580,000 The buiding has 5,000 square feet on each floor. In prior periods, the accounting manager merely divided the $80,000 occupency cost by 10,000 square feet to find an average cost of $8 per square foot and then charged each department a building occupancy cost equel to this rete times the number of square feet that it occupied. Diane Linder manages a first floor department that occupies 1100 square feet, and Juan Chiro manages a second-floor department that occupies 1,800 square feet of floor space. in discussing the departmental reports, the second-floor manager questions whether using the same rate per square foot for all departments makes sense because the first- floor space is more veluable. This manager also references a recent real estate stucty of average local rentai costs for similar space that shows frst-floor space worth $40 per squere foot and second floor space worth $20 per square foot excluding costs for heating, lighting. and meintenance) 2. Allocate the depreciation, interest, and taxes occupancy costs to the Linder and Chiro departments in proportion to the relat C Prev 7 of 7 Next

Explanation / Answer

Department Square Foot Rate Total Linder 1100 40 44000 Chiro 1800 20 36000 Total Square Foot Rate Total First Floor 5000 40 200000 Second Floor 5000 20 100000 Total 10000 300000 Linder Chiro Depreciation 22500/300000*44000 3300 22500/300000*36000 2700 Interest 33750/300000*44000 4950 33750/300000*36000 4050 Taxes 10000/300000*44000 1467 10000/300000*36000 1200 Gas 3125/10000*1100 343.75 3125/10000*1800 562.5 Lighting 3750/10000*1100 412.5 3750/10000*1800 675 Maintenance 6875/10000*1100 756.25 6875/10000*1800 1237.5 11229.17 10425.00

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