Question

Car mart pays $110,000 rent each year for its two-story building. the space in this building is occupied by five departments as specified here. paint department 1,575 square feet of first-floor space engine department 2,925 square feet of first-floor space window department 1,845 square feet of second-floor space electrical department 765 square feet of second-floor space accessory department 1,890 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.

Answer 1

First floor:

paint department 1,575 square feet

space engine department 2,925 square feet

Total = 4,500 square feet

Second floor:

space window department 1,845 square feet

electrical department 765 square feet

accessory department 1,890 square feet

Total = 4,500 square feet

Since 70% is allocated to the 1st floor, therefore the floor is receiving:

First floor expense = $110,000 * 0.70 = $77,000

Second floor expense = $110,000 - $77,000 = $33,000

The expense for each department is the proportion on the total expense per floor.

First floor:

paint department = (1575/4500) * 77,000 = $26,950

space engine department = 77,000 – 26,950 = $50,050

Second floor:

space window department = (1845/4500) * 33,000 = $13,530

electrical department = (765/4500) * 33,000 = $5,610

accessory department = 33,000 – 13530 – 5610 = $13,860