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 departmental income for the White and Grey Divisions, respectively.
A) $52,000; $163,000.
B) $172,000; $352,000.
C) $72,000; $163,000.
D) $72,000; $193,000.
E) $100,000; $241,000.

Question

Quizplus · Accepted Answer

Rent expense is allocated based on square footage. The White Division occupies 20,000 square feet and the Grey Division occupies 30,000 square feet. Therefore, the White Division is allocated $20,000/$50,000 * $50,000 = $20,000 of rent expense, and the Grey Division is allocated $30,000/$50,000 * $50,000 = $30,000 of rent expense.

Jamesway Corporation Has Two Separate Divisions That Operate as Profit