Question

A company rents a building with a total of 60,000 square feet, which are evenly divided between two floors. The company allocates the rent for space on the first floor at twice the rate of space on the second floor. The total monthly rent for the building is $36,000. How much of the monthly rental expense should be allocated to a department that occupies 12,000 square feet on the second floor

Answer 1

Cost allocated= $7,200

Step-by-step explanation:

Giving the following information:

Total number of square feet= 60,000

Total estimated costs= $36,000

Department square feet= 12,000

First, we need to calculate the cost allocation for each square foot:

Cost allocation rate= 36,000 / 60,000= $0.6 per square foot

Now, we can allocate costs to the department:

Cost allocated= 0.6*12,000

Cost allocated= $7,200