Question

A company pays $15,000 per period to rent a small building that has 10,000 square feet of space. This cost is allocated to the company's three departments on the basis of the amount of the space occupied by each. Department One occupies 2,000 square feet of floor space, Department Two occupies 3,000 square feet of floor space, and Department Three occupies 5,000 square feet of floor space. If the rent is allocated based on the total square footage of the space, Department One should be charged rent expense for the period of:

Answer 1

Rent Expense for Department 1 = $3000

Step-by-step explanation:

In order find the allocated expense of Department we need to find the Per square feet cost of small building.

Rent Per Square feet cost = Total Rent expense / Total Square Feet of Space

Rent Per Square Feed cost = $15000 / 10000

Rent Per Square Feet Cost = $1.5 Per Square Feet.

Now the Rent expense for Department 1 we need the square feet occupied by the department 1.

Rent expense of Department 1 = Square feet of Department 1 x Per Square feet cost

Rent Expense of Department 1 = 2000 Sq.ft x $ 1.50

Rent expense of Department 1 = $3000