The cost of rental space is the major fixed cost at Mattress Mart, a discount mattress store in a warehouse mall. The annual rental cost (actual and expected) is $360,000. The store occupies 60,000 square meters of space; the warehouse department occupies 30,000 meters, and the retail department occupies 20,000 meters. The remaining space is unoccupied. Using square meters as the capacity measure, what is the application rate?

Allocate the fixed costs to the warehouse and retail departments. How much of the fixed costs are treated as the cost of excess capacity?