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: $$\begin{array} { l r r r }
& \text { Men's } & \text { Women's } & \text { Children's } \
\text { Labor dollars } & \$ 530,000 & \$ 775,000 & \$ 2 4 0 , 0 0 0 \
\text { Number of employees } & 10 & 20 & 4 \
\text { Square footage } & 3,000 & 8,000 & 1,000 \
\text { Number of sales transactions } & 300,000 & 900,000 & 90,000
\end{array}$$ 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: $$\begin{array} { l r r r } 
& \text { Men's } & \text { Women's } & \text { Children's } \
\text { Labor dollars } & \$ 530,000 & \$ 775,000 & \$ 2 4 0 , 0 0 0 \
\text { Number of employees } & 10 & 20 & 4 \
\text { Square footage } & 3,000 & 8,000 & 1,000 \
\text { Number of sales transactions } & 300,000 & 900,000 & 90,000
\end{array}$$ 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 allocating rental costs is the number of sales transactions. The Women's Department had 900,000 sales transactions, which is 60% of the total sales transactions (900,000 / 1,500,000). Therefore, the Women's Department should be allocated 60% of the rental costs ($50,000 * 0.60 = $30,000).

Bank's Department Store Has Three Departments: Men's,Women's and Children's Using the Most Appropriate Cost Driver,how Much Rental Cost Should