Allocating Expense On The Basis Of Floor Spasce

Allocate the annual rent expense among the four departments on the basis of relative square feet of floor space occupied.

Allocating expense on the basis of floor spasce.

Other factors may also serve this purpose. Department 2 allocates costs on the basis of floor space occupied. There are certain expenses which cannot be apportioned or allocated among the different departments on a suitable basis the same should be transferred to general profit and loss account e g interest on capital debenture interest loss on sale of assets interest on loan general manager s salary etc. The amount of square footage by department is as follows department a.

An expense which is directly identifiable with a specific cost centre is allocated to that centre. The amount of square footage by department is as follows. Allocating operating expense square feet wray company rents 10 000 square feet of store space for 32 600 per year. Manufacturing floor space each product uses.

The basis for allocating expenses should be reasonable. Allocation is the process of identification of overheads with cost centres. Using the direct method the service department costs allocated to department 2 would be. Answer to allocating operating expense square feet johnson company rents 5 000 square feet of store space for 40 000 per year.

Using direct labor as a basis for allocation. Allocating operating expense square feet weaverling company rents 10 000 square feet of store space for 36 000 per year. For this example however the firm selects direct labor costs as the cost base for allocation. For example it would generally not be reasonable to allocate office heating costs on the basis of staff salaries since there is simply no relationship between the two.

Allocating operating expense square feet johnson company rents 5 000 square feet of store space for 40 000 per year. Department direct costs budgeted by department budgeted department 1 service in cubic feet floor space 1 10 000 2 2 2 30 000 2 1 3 300 000 8 5 4 500 000 4 2 totals 840 000 16 10 1. Dec 19 2012 12 27 pm. Ft allocate the annual rent expense among the four departments on the basis of relative square.

The telephone expense is allocated on the basis of floor space. The amount of square footage by departme. There should be a clear relationship between the cost of an item the activities it relates to and the basis of allocation. The amount of square footage by department is as follows.

If the telephone expense is 600 the amount allocated to department a is a. Note that the indirect cost total from exhibit 3 above is 1 422 500. Allocate the annual rent expense among the four departments on the basis of relative square feet of floor space occupied.