Bank's Department Store has three departments: Men's, Women's and Children's. The store incurred $50,000 of store rental costs during the current year. The departments identified the following cost drivers: $\begin{array}{lrrr}
&\text { Men's }&\text { Women's}&\text { Children's }\
\text { Labor dollars } & \text { \$ 530,000 } & \$ 775,000 & \$ 240,000 \
\text { Number of employees } & 10 & 20& 4 \
\text { Square footage } & 3,000 & 8,000 & 1,000\
\text { Number of sales transactions } & 300.000 & 900.000 & 90.000
\end{array}$ Using the most appropriate cost driver, how much rental cost should be allocated to the Women's Department? (Do not round intermediate calculations. Round final answer to the nearest dollar.)

Question

Bank's Department Store has three departments: Men's, Women's and Children's. The store incurred $50,000 of store rental costs during the current year. The departments identified the following cost drivers: $\begin{array}{lrrr}
&\text { Men's }&\text { Women's}&\text { Children's }\
\text { Labor dollars } & \text { \$ 530,000 } & \$ 775,000 & \$ 240,000 \
\text { Number of employees } & 10 & 20& 4 \
\text { Square footage } & 3,000 & 8,000 & 1,000\
\text { Number of sales transactions } & 300.000 & 900.000 & 90.000
\end{array}$  Using the most appropriate cost driver, how much rental cost should be allocated to the Women's Department? (Do not round intermediate calculations. Round final answer to the nearest dollar.)

Quizplus · Accepted Answer

The most appropriate cost driver for rental costs is square footage. The Women's Department occupies 8,000 out of a total 12,000 square feet (3,000 + 8,000 + 1,000). Therefore, the rental cost allocated to the Women's Department is $(8,000/12,000) \times 50,000 = 33,333$.

Bank's Department Store Has Three Departments: Men's, Women's and Children's