Matilda Products is a manufacturer of leather goods and for management and control purposes is divided into three departments. For the year ended 30 June the following information has been collected to determine the best way to allocate rent expense to each department.

Required Determine which method of allocating the rent would be preferred by the manager of each department.

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Sales Handbags $960 000 Floor area 205 Luggage $576 000 375 Accessories Total $384 000 $ 1 920 000 170 750 occupied (m) Profit before rent $192 000 $ 84 000 $ 76 000 $ 352 000 allocation The rent for the year for the store is $160 000. The manager of each department is paid a bonus of 5% of any profit in excess of 10% of sales for the department. The owner of Matilda Products is considering allocating the rent expense to each department using as the base either the percentage of total sales or the floor area occupied.