Allegheny Community College operates four departments. The square footage used by each department is shown below. Allegheny's annual building rental cost is $320,000.
What amount of rent expense that should be allocated to the Technology Department?
A) $60,000
B) $80,000
C) $120,000
D) $192,000

Question

Allegheny Community College operates four departments. The square footage used by each department is shown below.  Allegheny's annual building rental cost is $320,000.
What amount of rent expense that should be allocated to the Technology Department?
A) $60,000 
B) $80,000 
C) $120,000 
D) $192,000

Quizplus · Accepted Answer

Allocation rate = Total cost to be allocated ÷ Cost driver (allocation base)
Allocation rate = $320,000 ÷ 16,000 sq. ft. = $20 per sq. ft.
Allocation per cost object = Allocation rate × Weight of the cost driver for that cost object
Allocation of overhead cost to Technology Dept. = $20 per sq. ft. × 6,000 sq. ft. = $120,000

Allegheny Community College Operates Four Departments