Jamesway Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year: The White Division occupies 20,000 square feet in the plant. The Grey Division occupies 30,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $50,000. Compute gross profit for the White and Grey Divisions, respectively.
A) $72,000; $193,000.
B) $172,000; $352,000.
C) $100,000; $241,000.
D) $52,000; $163,000.
E) $72,000; $163,000.

Question

Jamesway Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year:  The White Division occupies 20,000 square feet in the plant. The Grey Division occupies 30,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $50,000. Compute gross profit for the White and Grey Divisions, respectively.
A) $72,000; $193,000. 
B) $172,000; $352,000. 
C) $100,000; $241,000. 
D) $52,000; $163,000. 
E) $72,000; $163,000.

Quizplus · Accepted Answer

First, we need to allocate the indirect rent expense based on square footage:

White Division: $50,000 x (20,000 / 50,000) = $20,000
Grey Division: $50,000 x (30,000 / 50,000) = $30,000

Then we can calculate gross profit for each division:

White Division: $200,000 - $120,000 - $20,000 = $60,000
Grey Division: $600,000 - $280,000 - $30,000 = $290,000

Therefore, the answer is C) $100,000; $241,000.

Jamesway Corporation Has Two Separate Divisions That Operate as Profit