Marsden Company has three departments occupying the following amount of floor space: Department 1 23,000 sq. ft. Department 2 11,700 sq. ft. Department 3 33,000 sq. ft. How much store rent should be allocated to Department 3 if total rent is equal to $108,000

The total rent expense allocated to Department 3 is $52644.02

Explanation:

The rent for the store will be allocated among the three departments based on the floor are used by each department. The total floor are used by all three departments equal,

Total floor area = 23000 + 11700 + 33000 = 67700 sq. ft.

Total rent that would be allocated to Department 3 using the floor are criteria is,

Rent expense-Department 3 = 108000 * 33000/67700  

Rent Expense-Department 3 = $52644.017 rounded off to $52644.02

$52,644 is the amount that should be allocated to Department 3

Explanation:

Given Data;

Department 1           Department 2                 Department 3

  23,000 sq. ft.           11,700 sq. ft                     33,000 sq. ft

Total rent = $108,000

The total store rent will be distributed among the three department as follows.

Total floor space = 23,000 sq. ft. + 11,700 sq. ft + 33,000 sq. ft

                            = 67700 sq.ft

In calculating the rent allocated to department 3, we use the formula;

Store rent allocated to department 3 =

(department 3 floor space/total floor space) * total rent

Substituting into the formula, we have

Store rent allocated to department 3 = (33,000/67700) * $108,000

                                                                = 0.4874 * $108,000

                                                              = $52,644

Therefore, $52,644 is the amount that should be allocated to Department 3

income statement is prepared in order to show the profits and loss of a business. in order to prepare the income statement she should collect all the income and expenses of the product with the cost of production.

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