National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for the current period follow.

DepreciationBuilding	$	31,500
InterestBuilding mortgage		47,250
TaxesBuilding and land		14,000
Gas (heating) expense		4,375
Lighting expense		5,250
Maintenance expense		9,625
Total occupancy cost	$	112,000

The building has 7,000 square feet on each floor. In prior periods, the accounting manager merely divided the $112,000 occupancy cost by 14,000 square feet to find an average cost of $8 per square foot and then charged each department a building occupancy cost equal to this rate times the number of square feet that it occupied.

Diane Linder manages a first-floor department that occupies 900 square feet, and Juan Chiro manages a second-floor department that occupies 1,900 square feet of floor space. In discussing the departmental reports, the second-floor manager questions whether using the same rate per square foot for all departments makes sense because the first-floor space is more valuable. This manager also references a recent real estate study of average local rental costs for similar space that shows first-floor space worth $30 per square foot and second-floor space worth $20 per square foot (excluding costs for heating, lighting, and maintenance).

References

Section BreakProblem 24-1A Allocation of building occupancy costs to departments LO P2

48.

value: 8.00 points

Required information

Problem 24-1A Part 1

Required:

1.	Allocate occupancy costs to the Linder and Chiro departments using the current allocation method.(Round cost answers to 2 decimal places.)

References

eBook & Resources

WorksheetDifficulty: Hard

Problem 24-1A Part 1Learning Objective: 24-P2 Allocate indirect expenses to departments

49.

value: 8.00 points

Required information

Problem 24-1A Part 2

2.	Allocate the depreciation, interest, and taxes occupancy costs to the Linder and Chiro departments in proportion to the relative market values of the floor space. Allocate the heating, lighting, and maintenance costs to the Linder and Chiro departments in proportion to the square feet occupied (ignoring floor space market values). (Round your intermediate calculations to 2 decimal places.)