Bidden Department Store has four departments: men's, women's, children's, and electronics. The following information is provided:


Men's Women's Children's Electronics
Floor Space $10,000 sq ft. 20,000 sq ft. 8,000 sq ft. 2,000 sq ft.
Sales $35,000 $75,000 $20,000 $12,000

The company's accountant needs to allocate the store's monthly rent of $12,000.

Required.

1.) Compute the allocation rate that should be used to allocate the rent cost to the four departments.

2.) Comput the amount of rent that should be allocated to each of the four departments.

3.) Currently, the managers are paid a bonus based on sales. As you can see from the above table, the women's department manager will receive the largest bonus. Do you believe this bonus plan is fair to all four-department managers? Why or Why not?

Needs to be completed by 3:00pm on 03/26/08.

1.) Compute the allocation rate that should be used to allocate the rent cost to the four departments.

Use Floor Space.

Men 10,000
Women 20,000
Children 8,000
Electronics 2,000

Total = 40,000

Men = 10,000 / 40,000 = 25%
Women = 20,000 / 40,000 = 50%
Children = 8,000 / 40,000 = 20%
Electronics = 2,000 / 40,000 = 5%



2.) Compute the amount of rent that should be allocated to each of the four departments.

Monthly rent is 12,000. 25% of that to Men’s, 50% to Women’s, etc.



3.) Currently, the managers are paid a bonus based on sales. As you can see from the above table, the women's department manager will receive the largest bonus. Do you believe this bonus plan is fair to all four-department managers? Why or Why not?

That is up to you. You think the current system is fair?

They also have a bigger area.

Perhaps some sort of allocation/pro rating could be used.