Answer the following questions using the information below:
King Corporation has two departments, Small and Large. Central costs could be allocated to the two departments in various ways.

-If total rent expense of $120,000 is allocated on the basis of square footage, the amount allocated to the Small Department would be:
A)$20,000
B)$30,000
C)$84,000
D)$90,000

Question

Answer the following questions using the information below:
King Corporation has two departments, Small and Large. Central costs could be allocated to the two departments in various ways.
 
-If total rent expense of $120,000 is allocated on the basis of square footage, the amount allocated to the Small Department would be:
A)$20,000 
B)$30,000 
C)$84,000 
D)$90,000

Quizplus · Accepted Answer

The amount of rent to be allocated to the Small Department would be proportional to its square footage. According to the diagram, the Small Department occupies 25% of the total square footage (5,000 out of 20,000 square feet). Therefore, the rent allocated to the Small Department would be 25% of the total rent expense of $120,000. 
25% of $120,000 = $30,000. Hence, the answer is B.

Answer the Following Questions Using the Information Below