City Bank has several departments that occupy both floors of atwo-story building. The departmental accounting system has a singleaccount, Building Occupancy Cost, in its ledger. The types andamounts of occupancy costs recorded in this account for the currentperiod follow.
Depreciation - Building $ 31,500
Interest - Buidling Mortgage 47,25
Taxes - Building & Land 14,000
Gas (Heating) Expense 4,375
Lighting Expense 5,250
Maintenance Expense 9,625
_____________________________
Total Occupancy Cost $112,00
The building has 7,000 square feet on each floor. In priorperiods, the accounting manager merely divided the $112,000occupancy cost by 14,000 square feet to find an average cost of $8per square foot and then charged each department a buildingoccupancy cost equal to this rate times the number of square feetthat it occupied.
Laura Diaz manages a first-floor department that occupies 900square feet, and Lauren Wright manages a second-floor departmentthat occupies 1,800 square feet of floor space. In discussing thedepartmental reports, the second-floor manager questions whetherusing the same rate per square foot for all departments makes sensebecause the first-floor space is more valuable. This manager alsoreferences a recent real estate study of average local rental costsfor similar space that shows first-floor space worth $40 per squarefoot and second-floor space worth $10 per square foot (excludingcosts for heating, lighting, and maintenance).
1. Allocate occupancy costs to the Diaz and Wright departmentsusing the current allocation method
Diaz's Department $ ________
Wright's Department $ _______
2. Allocate the depreciation, interest, and taxes occupancy coststo the Diaz and Wright departments in proportion to the relativemarket values of the floor space. Allocate the heating, lighting,and maintenance costs to the Diaz and Wright departments inproportion to the square feet occupied (ignoring floor space marketvalues). (Round your intermediate percentages of costallocation to nearest whole percent. Round your cost per Sq. ft to2 decimal places and round intermediate dollar amounts and finalanswers to the nearest whole number. Omit the "$" sign in yourresponse.)
Diaz's Department $ ________
Wright's Department $ _______
City Bank has several departments that occupy both floors of atwo-story building. The departmental accounting system has a singleaccount, Building Occupancy Cost, in its ledger. The types andamounts of occupancy costs recorded in this account for the currentperiod follow. |
Depreciation - Building $ 31,500
Interest - Buidling Mortgage 47,25
Taxes - Building & Land 14,000
Gas (Heating) Expense 4,375
Lighting Expense 5,250
Maintenance Expense 9,625
_____________________________
Total Occupancy Cost $112,00
The building has 7,000 square feet on each floor. In priorperiods, the accounting manager merely divided the $112,000occupancy cost by 14,000 square feet to find an average cost of $8per square foot and then charged each department a buildingoccupancy cost equal to this rate times the number of square feetthat it occupied. | ||||
| Laura Diaz manages a first-floor department that occupies 900square feet, and Lauren Wright manages a second-floor departmentthat occupies 1,800 square feet of floor space. In discussing thedepartmental reports, the second-floor manager questions whetherusing the same rate per square foot for all departments makes sensebecause the first-floor space is more valuable. This manager alsoreferences a recent real estate study of average local rental costsfor similar space that shows first-floor space worth $40 per squarefoot and second-floor space worth $10 per square foot (excludingcosts for heating, lighting, and maintenance).
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