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Biden Department Store Has Four Departments: Men's,women's,children's,and Electronics The Company's Accountant Needs to Allocate the Store's Annual Rent

Question 144

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Biden Department Store has four departments: men's,women's,children's,and electronics.The following information is provided:  Men’s  Women’s  Chaldren’s  Electronics  Floof space 10,000sq.ft20,000sq ft. 8,000sq ft. 2,000 sq. ft.  Sales $35,000$75,000$20,000$12,000\begin{array}{|l|l|l|l|l|}\hline & \text { Men's } & \text { Women's } & \text { Chaldren's } & \text { Electronics } \\\hline \text { Floof space } & 10,000 \mathrm{sq} . \mathrm{ft} & 20,000 \mathrm{sq} \text { ft. } & 8,000 \mathrm{sq} \text { ft. } & 2,000 \text { sq. ft. } \\\hline \text { Sales } & \$ 35,000 & \$ 75,000 & \$ 20,000 & \$ 12,000 \\\hline\end{array} The company's accountant needs to allocate the store's annual rent of $160,000.
Required:
1)Compute the allocation rate that should be used to allocate the rent cost to the four departments.
2)Compute the amount of rent that should be allocated to each of the four departments.
3)Currently,the managers are paid a bonus based on sales.As you can see from the above table,the women's department manager will receive the largest bonus.Do you believe this bonus plan is fair to all four department managers? Why or why not?

Correct Answer:

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1)Allocation rate: $160,000 ÷ 40,000 = $...

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