Managerial Accounting
Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
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Chapter 9, Problem 7QS
To determine

Cost Allocation:

Sometime a cost is incurred for a whole firm and not for a particular department. In this case cost allocation is used. It is a way through which a particular cost is assigned to the respective department.

To compute: Allocation of rental expense to each department.

Expert Solution & Answer
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Explanation of Solution

Jewelry department:

Given,
Area occupied by this department is 1,440 square feet.
Total area of first floor is 4,800 square feet.
Total first floor rent is $84,500.

Formula to calculate rental expense,

    Rentalexpense= Areaoccupiedbythisdepartment Totalareaoffirstfloor ×Totalfirstfloorrent

Substitute, 1,440 square feet for area occupied by this department, 4,800 square feet for total area of first floor and $84,500 for Total first floor rent in the above equation.

    Rentalexpense= 1,440 4,800 ×$84,500 =$25,350

Hence, rental expense of jewelry department is $25,350.

Working notes:

Calculation for first floor rent,

    Firstfloorrent=Rentpercentage×Totalrent = 65 100 ×$130,000 =$84,500

Cosmetic department:

Given,
Total first floor rent is $84,500.
Jewelry department rent is $25,350.

Formula to calculate rental expense,

    Rentalexpense=TotalfirstfloorrentJewelrydepartmentrent

Substitute, $84,500 for the first floor rent and $25,350 for jewelry department rent in the above equation.

    Rentalexpense=$84,500$25,350 =$59,150

Hence, cosmetics department rent is $59,150.

House wares department:

Given,
Area occupied by this department is 2,016 square feet.
Total area of second floor is 4,800 square feet.
Total second floor rent is $45,500.

Formula to calculate rental expense,

    Rentalexpense= Areaoccupiedbythisdepartment Totalareaofsecondfloor ×Totalsecondfloorrent

Substitute, 2,016 square feet for area occupied by this department, 4,800 square feet for total area of second floor and $45,500 for total second floor rent in the above equation.

    Rentalexpense= 2,016 4,800 ×$45,500 =$19,110

Hence, rental expense of house wares department is $19,110.

Working notes:

Calculation for second floor rent,

    Secondfloorrent=Rentpercentage×Totalrent = 35 100 ×$130,000 =$45,500

Tools department:

Given,
Area occupied by this department is 960 square feet.
Total area of second floor is 4,800 square feet.
Total second floor rent is $45,500.

Formula to calculate rental expense,

    Rentalexpense= Areaoccupiedbythisdepartment Totalareaofsecondfloor ×Totalsecondfloorrent

Substitute, 960 square feet for area occupied by this department, 4,800 square feet for total area of second floor and $45,500 for total second floor rent in the above equation.

    Rentalexpense= 960 4,800 ×$45,500 =$9,100

Hence, rental expense of tools department is $9,100.

Shoes department:

Given,
Area occupied by this department is 1,824 square feet.
Total area of second floor is 4,800 square feet.
Total second floor rent is $45,500.

Formula to calculate rental expense,

    Rentalexpense= Areaoccupiedbythisdepartment Totalareaofsecondfloor ×Totalsecondfloorrent

Substitute, 1,824 square feet for area occupied by this department, 4,800 square feet for total area of second floor and $45,500 for total second floor rent in the above equation.

    Rentalexpense= 1,824 4,800 ×$45,500 =$17,290

Hence, rental expense of shoes department is $17,290.

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Chapter 9 Solutions

Managerial Accounting

Ch. 9 - Prob. 6DQCh. 9 - Prob. 7DQCh. 9 - Prob. 8DQCh. 9 - Prob. 9DQCh. 9 - Prob. 10DQCh. 9 - Prob. 11DQCh. 9 - Prob. 12DQCh. 9 - Prob. 13DQCh. 9 - Prob. 14DQCh. 9 - Prob. 15DQCh. 9 - Prob. 16DQCh. 9 - Prob. 17DQCh. 9 - Prob. 18DQCh. 9 - Allocation and measurement terms C1 In each blank...Ch. 9 - Basis for cost allocation C1 In each blank next...Ch. 9 - Prob. 3QSCh. 9 - Prob. 4QSCh. 9 - Prob. 5QSCh. 9 - Prob. 6QSCh. 9 - Prob. 7QSCh. 9 - Prob. 8QSCh. 9 - Computing return on investment A1 Compute return...Ch. 9 - Computing residual income A1 Refer to the...Ch. 9 - Prob. 11QSCh. 9 - Computing profit margin and investment turnover A2...Ch. 9 - Performance measures__balanced scorecard A3...Ch. 9 - Prob. 14QSCh. 9 - Prob. 15QSCh. 9 - Prob. 16QSCh. 9 - Prob. 17QSCh. 9 - Prob. 18QSCh. 9 - Prob. 19QSCh. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - Prob. 3ECh. 9 - Prob. 4ECh. 9 - Prob. 5ECh. 9 - Prob. 6ECh. 9 - Prob. 7ECh. 9 - Prob. 8ECh. 9 - Prob. 9ECh. 9 - Prob. 10ECh. 9 - Prob. 11ECh. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Prob. 14ECh. 9 - Prob. 15ECh. 9 - Exercise 22-16 Performance measures-balanced...Ch. 9 - Prob. 17ECh. 9 - Prob. 18ECh. 9 - Prob. 19ECh. 9 - Prob. 20ECh. 9 - Prob. 21ECh. 9 - Prob. 22ECh. 9 - Prob. 23ECh. 9 - Prob. 1PSACh. 9 - Prob. 2PSACh. 9 - Prob. 3PSACh. 9 - Prob. 4PSACh. 9 - Prob. 5PSACh. 9 - Prob. 1PSBCh. 9 - Prob. 2PSBCh. 9 - Prob. 3PSBCh. 9 - Prob. 4PSBCh. 9 - Prob. 5PSBCh. 9 - Santana Rey’s two departments, computer consulting...Ch. 9 - Prob. 1AACh. 9 - Prob. 2AACh. 9 - Prob. 3AACh. 9 - Prob. 1BTNCh. 9 - Prob. 2BTNCh. 9 - Prob. 3BTNCh. 9 - Prob. 4BTNCh. 9 - Prob. 5BTNCh. 9 - Prob. 6BTN
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