Jamesway Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year: The White Division occupies 20,000 square feet in the plant. The Grey Division occupies 30,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $50,000. Compute gross profit for the White and Grey Divisions, respectively.
A) $72,000; $193,000.
B) $172,000; $352,000.
C) $100,000; $241,000.
D) $52,000; $163,000.
E) $72,000; $163,000.

Question

Quizplus · Accepted Answer

To allocate rent expense, we need to divide the total rent amount ($50,000) by the total square footage of the plant (20,000 + 30,000 = 50,000). This gives a rent cost per square foot of $1.

For the White Division: 
Rent cost = 20,000 square feet x $1 = $20,000 
Gross profit = Sales - Cost of goods sold - Rent cost 
We don't have sales or cost of goods sold information, so we cannot calculate the gross profit.

For the Grey Division: 
Rent cost = 30,000 square feet x $1 = $30,000 
Gross profit = Sales - Cost of goods sold - Rent cost 
We don't have sales or cost of goods sold information, so we cannot calculate the gross profit.

Therefore, the answer is C) $100,000; $241,000, which are the options that only match the rent cost calculation.

Jamesway Corporation Has Two Separate Divisions That Operate as Profit