Question

""Bank's Department Store has three departments: Men's, Women's, and Children's. The store incurred $23,000 of store rental costs during the current year. The departments identified the following cost drivers: Men's Women's Children's Labor dollars $ 523,000 $ 768,000 $ 233,000 Number of employees 27 37 21 Square footage 2,300 7,300 1,600 Number of sales transactions 293,000 893,000 83,000 Using the most appropriate cost driver, how much rental cost should be allocated to the Women's Department? (Do not round intermediate calculations. Round final answer to the nearest dollar.)""

Answer 1

To allocate the rental cost to the Women's Department, we use the square footage as the cost driver and calculate the rental cost based on the department's square footage.

Step-by-step explanation:

To determine the rental cost that should be allocated to the Women's Department, we need to use an appropriate cost driver. In this case, the most appropriate cost driver would be the square footage of each department. The Women's Department has a square footage of 7,300, while the Men's Department has a square footage of 2,300 and the Children's Department has a square footage of 1,600.

To calculate the rental cost for the Women's Department, we can use the formula:

Rental cost allocated to Women's Department = (Total rental cost / Total square footage) * Women's Department square footage

Plugging in the numbers, we get:

Rental cost allocated to Women's Department = ($23,000 / 11,200) * 7,300 = $14,911.61

Therefore, the rental cost that should be allocated to the Women's Department is approximately $14,912.