Please help me answer the below two problems: Required information The following

Question

Please help me answer the below two problems:

Required information The following information applies to the questions displayed below.] National Bank 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 Depreciation-Building Interest-Building mortgage Taxes-Building and land Gas (heating) expense Lighting expense Haintenance expense Total occupancy cost $18,000 27,000 8,000 2,500 3,000 5, 500 $64,000 The building has 4,000 square feet on each floor. In prior periods, the accounting manager merely divided the $64,000 occupancy cost by 8,000 square feet to find an average cost of $8 per square foot and then charged each department a building occupancy cost equal to this rate times the number of square feet that it occupied Diane Linder manages a first-floor department that occupies 900 square feet, and Juan Chiro manages a second-floor department that occupies 1,900 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-floon space is more valuable. This manager also references a recent real estate study of average local rental costs for similar space that shows first-floor space worth $30 per square foot and second-floor space worth $20 per square foot (excluding costs for heating, lighting, and maintenance).

Explanation / Answer

First, you need to divide fixed cost and variable cost

FIxed cost = Depreciation = 18000

Interest = 27000

Taxes = 8000

-----------------------------------

53000

Variable cost = Gas = 2500

Lighting = 3000

Maintenance = 5500

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11000   

Now we assume that each floor has 1/2 the total gross area.

And for first floor is 75% of fixed cost and second floor 25%

First floor = 53000*75%= 39750

Second floor = 53000*25% = 13250

Next, you need to know the price of sq feet

First floor = 39750 / 4000 = 9.937/ sq ft

Second floor = 13250/4000= 3.3125/sq ft

Now for variable cost = 11000/8000 = 1.375/ sq ft

Finally you calculate the allocation cost

Liner = (900*9.9375)+(900*1.375) =10181.25

Chiro = (1900*3.3125)+(1900*1.375)= 8905.25

and you just fill the sheets

1 You do the same process without adding interest and taxes, and depreciation, only occupancy cost

2.

department Square footage Rate Total Linder's 900 9.93 10181.25 Chiro's 1900 3.31 8906.25

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