In: Accounting
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
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