Question

A company rents a building with a total of 55,000 square feet, which are evenly divided between two floors. the total monthly rent for the building is $49,500. the company allocates $33,000 of total rent expense to the first floor and $16,500 of total rent expense to the second floor. how much of the monthly rental expense should be allocated to a department that occupies 10,000 square feet on the second floor?

Answer 1

the monthly rental expense should be $8,000

What is expense?

An expense is defined as any item that necessitates the payment of money, or any type of fortune in general, to another person or organization in exchange for an item, service, or other category of charges. Rent is an expense for a tenant. Tuition is an expense for both students and parents.

The cost of manufacturing and operations is referred to as cost. Rent, utilities, and other set monthly expenses are examples of expenses. A cost is an estimated amount that people pay or spend when they go shopping. It can be precise, such as asking the showroom owner how much an Audi costs in America.

Given:

total monthly rent for the building is $49,500.

the company allocates $33,000 of total rent expense to the first floor.

$16,500 of total rent expense to the second floor.

To find: the monthly rental expense should be allocated to a department that occupies 10,000 square feet

solution:

The computation of the monthly rental expense allocated is shown below:

Rent allocated to 1st floor:

= $30,000 × 2 ÷ 3

= $20,000

There is 50,000 square feet i.e. equally divided between first floor and second floor. so 25,000 square feet for each floor.

Now  

Rent allocated to 10,000 square feet:

= ($20,000 ÷ 25,000) × 10,000

= $8,000

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