EXERCISE 1: Baskings Incorporated manufactures and sells industrial shelving units through two departments; 1) Retail- where units are sold online directly to consumers 2) Government-where units are sold to various governmental agencies. To house and distribute its inventory, Baskings maintains a total of 120,000 sq. feet of warehousing space. The company also has 400 employees. Baskings pays a monthly lease fee on its sorting and distribution equipment in the amount of $84,000. The equipment services both departments and is identified as an indirect cost. Following are some more specific breakdowns for each department: Retail Total Warehouse s 40,000 sq. ft 80,000 sq. ft 120,000 sq. ft. ce 130 270 Em 400 What is the cost object in this example? Departments Baskings would like to evaluate the differences in allocating leasing costs using the following cost drivers: Step 1: Compute an allocation rate Cost Driver(Allocation Base) Indirect Costs Allocation Rate Lease Fee Total Sq. Feet per foot Step 2: Allocate costs: Allocation Rate Cost Driver Allocated Retail sq ft. Government 5 sq. ft. TOTAL Step 1: Compute an allocation rate: Cost Driver(Allocation Base) Indirect Costs Allocation Rate Lease Fee Employees $per employee Step 2: Allocate costs: Allocation Rate Cost Driver Allocated Retail emp. Government emp. TOTAL