Business Assignment 6 - Comparing Activity Based Costing and Traditional Costing Assume you are looking to share an apartment with another person, Joe. The rent for a 2-bedroom/2 bath apartment is $1,000 per month. Joe wants to split the rent 50/50. Prior to agreeing to this, you find out the following information: Joes bedroom is 20 x 24 or 480 square feet with an on suite bath. Your bedroom is 12 x 10 or 120 square feet and the bath will be used by visitors too. You think that the rent should be allocated between you and Joe based upon the relative square feet of your rooms.

1. Using Joes method for splitting the rent, how much rent will each of you pay? (2 points)

2. Using your method of allocating rental costs based upon the square feet of your rooms, how much rent will each of you pay? (4 points)

3. Whose method (Joes or yours) represents activity-based costing? (2 points)

4. Which method is most accurate? Why? (2 points)