Question

Wray Company rents 10,000 square feet of store space for $49,000 per year. The amount of square footage by department is as follows:

Department A:	1,600 sq. ft.
Department B:	2,200 sq. ft.
Department C:	3,800 sq. ft.
Department D:	2,400 sq. ft.

Allocate the annual rent expense among the four departments on the basis of relative square feet of floor space occupied:

	Annual Rent Expense
Department A	$ ???????
Department B	???????
Department C	??????
Department D	??????
Total	$ ????????

Answer 1

Answer

Total Rent = $49,000 per year

Total Store Space = 10,000 square feet

Annual Rent Expenses for Each Department = Total Rent * (Store Space Used By Department / Total Store Space)

Store Space used by Department A = 1,600 sq. ft.

So, Annual Rent Expense for Department A = 49,000 * ( 1,600 / 10,000)

= 49,000 * 0.16

= $7,840

Store Space used by Department B = 2,200 sq. ft.

So, Annual Rent Expense for Department B = 49,000 * (2,200 / 10,000)

= 49,000 * 0.22

= $10,780

Store Space used by Department C = 3,800 sq. ft.

So, Annual Rent Expense for Department C = 49,000 * ( 3,800 / 10,000)

= 49,000 * 0.38

= $18,620

Store Space used by Department D = 2,400 sq. ft.

So, Annual Rent Expense for Department D = 49,000 * (2,400 / 10,000)

= 49,000 * 0.24

= $11,760

Total = Rent Expense for Department A + Rent Expense for Department B + Rent Expense for Department C + Rent Expense for Department D

= $7,840 + $10,780 + $18,620 + $11,760

= $49,000

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