Question

Saylind Molding paid $1,768,000 in rent for the year. The company's three departments are Headrests, Armrests, and Floor Mats. The accountant has identified two possible cost drivers. The number of employees in each department and the square footage of space occupied by each department. The number of employees working in each department includes 96 in the Headrest Department, 66 in the Armrest Department and 146 in Floor Mats Department. The departments occupy 23,000, 24,300, and 20,700 square feet, for Headrests, Armrests, and Floor Mats respectively. How much of the rent cost should be allocated to the products made in the Floor Mats department?

Answer 1

The rent cost allocated to the products made in the Floor Mats department is $538,379.84.

Step-by-step explanation:

To allocate the rent cost to the products made in the Floor Mats department, we need to use a cost driver. In this case, we have two possible cost drivers: the number of employees in each department and the square footage of space occupied by each department. We will use the square footage as the cost driver.

1. Calculate the total square footage of all departments: 23,000 + 24,300 + 20,700 = 68,000 square feet.
2. Calculate the percentage of square footage occupied by the Floor Mats department: 20,700 / 68,000 = 0.30441 (or 30.44%).
3. Multiply the total rent cost by the percentage to allocate it to the Floor Mats department: $1,768,000 * 0.30441 = $538,379.84.

Therefore, $538,379.84 of the rent cost should be allocated to the products made in the Floor Mats department.