A retailer pays $180,000 rent each year for its two-story building. The space in

Question

A retailer pays $180,000 rent each year for its two-story building. The space in this building is occupied by five departments as specified here Jewelry department Cosmetics department Housewares department Tools department Shoes department 1,290 square feet of first-floor space 3,010 square feet of first-floor space 1,806 square feet of second-floor space 774 square feet of second-floor space 1,720 square feet of second-floor space 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. 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

Explanation / Answer

Answer:-

Allocation of rent expense Particulars Amount Allocated % of Total Cost $ $ First floor 180000 70 180000*70%=126000 Second floor 180000 30 180000*30%=54000 Totals 100 180000 First floor Sq. Feet % of Total Cost $ Jewelry Dept. 1290 30 126000*30%=37800 Cosmetics Dept. 3010 70 126000*70%=88200 Totals 4300 100 126000 Second floor Sq. Feet % of Total Cost $ Housewares Dept. 1806 42 54000*42%=22680 Tools Dept. 774 18 54000*18%=9720 Shoes Dept. 1720 40 54000*40%=21600 Totals 4300 54000

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