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: Using the most appropriate cost driver, how much rental cost should be allocated to the Women's Department? (Do not round intermediate calculations. Round your answer to the nearest dollar.)
A) $33,333
B) $29,412
C) $25,081
D) $34,884

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:  Using the most appropriate cost driver, how much rental cost should be allocated to the Women's Department? (Do not round intermediate calculations. Round your answer to the nearest dollar.)
A) $33,333 
B) $29,412 
C) $25,081 
D) $34,884

Quizplus · Accepted Answer

Assuming managers are assigned a certain amount of the rental cost for each square foot of space they use, they should have the authority to establish the size of the space used by their departments.
Allocation rate = Total cost to be allocated ÷ Cost driver (allocation base)
Allocation rate = $50,000 ÷ (3,000 sq. ft. + 8,000 sq. ft. + 1,000 sq. ft.) = $4.1667 per sq. ft.
Allocation per cost object = Allocation rate × Weight of the cost driver for that cost object
Allocation of overhead cost to Women's Department = $4.1667 per sq. ft. × 8,000 sq. ft. = $33,333

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