Carpet Plus has outgrown its current building and needs to find additional storage space. The company currently operates three divisions, Carpet, Tile, and Vinyl. The needs of each division are as follows. Each division tried to separately find their own rental space. The carpet division found what it needed for $600 per month, the tile division's quote came in at $500 per month, and the Vinyl division found a space for $900 per month. The company manager feels it would be more beneficial for the company to find one space that all three divisions can share. The larger facility came in at $1,500 per month, and the manager chose to rent that space. Now he needs to decide how to allocate the common costs to all three divisions. Instructions
a.Determine how much cost will be allocated to each division if the manager uses the stand-alone method.
b.Determine how much cost will be allocated to each division if the manager uses the incremental method.
c.Which method should the manager use and why?
d.Are there any other methods the manager could use to allocate the costs?

Question

Carpet Plus has outgrown its current building and needs to find additional storage space. The company currently operates three divisions, Carpet, Tile, and Vinyl. The needs of each division are as follows.  Each division tried to separately find their own rental space. The carpet division found what it needed for $600 per month, the tile division's quote came in at $500 per month, and the Vinyl division found a space for $900 per month. The company manager feels it would be more beneficial for the company to find one space that all three divisions can share. The larger facility came in at $1,500 per month, and the manager chose to rent that space. Now he needs to decide how to allocate the common costs to all three divisions. Instructions 
a.Determine how much cost will be allocated to each division if the manager uses the stand-alone method.
b.Determine how much cost will be allocated to each division if the manager uses the incremental method.
c.Which method should the manager use and why?
d.Are there any other methods the manager could use to allocate the costs?

Quizplus · Accepted Answer

The Answer of Carpet Plus has outgrown its current building and needs to find additional storage space. The company currently operates three divisions, Carpet, Tile, and Vinyl. The needs of each division are as follows.  Each division tried to separately find their own rental space. The carpet division found what it needed for $600 per month, the tile division's quote came in at $500 per month, and the Vinyl division found a space for $900 per month. The company manager feels it would be more beneficial for the company to find one space that all three divisions can share. The larger facility came in at $1,500 per month, and the manager chose to rent that space. Now he needs to decide how to allocate the common costs to all three divisions. Instructions 
a.Determine how much cost will be allocated to each division if the manager uses the stand-alone method.
b.Determine how much cost will be allocated to each division if the manager uses the incremental method.
c.Which method should the manager use and why?
d.Are there any other methods the manager could use to allocate the costs?

Carpet Plus Has Outgrown Its Current Building and Needs to Find