Question

Bobby is an accountant who uses a portion of his home as his office. His home is 2,500 square feet and his office space occupies 1,500 square feet. Rent expense is $18,000 a year; utilities expense is $2,000 a year; and maintenance expense is $3,000 a year.

Required:
1. What is the total amount of these expenses that can be allocated to his home office?
a. $9,280
b. $13,800
c. $9,200
d. $23,000
e. $5,800

Answer 1

The correct answer is B.

Step-by-step explanation:

Giving the following information:

His home is 2,500 square feet and his office space occupies 1,500 square feet. Rent expense is $18,000 a year; utilities expense is $2,000 a year, and maintenance expense is $3,000 a year.

First, we need to calculate the proportion of space occupied by the office:

The proportion of space= 1,500/2,500= 0.6

Total expense= 18,000 + 2,000 + 3,000= $23,000

Now, we calculate the cost allocated:

Cost allocated= 23,000*0.6= $13,800