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Difficulty: EasyAllocation and Apportionment of Expenses among Departments

Ade and Sons Enterprises operates two departments, Department X and Department Y, which occupy floor areas of 1,200 m21,200\text{ m}^2 and 800 m2800\text{ m}^2 respectively. If the total rent expense incurred by the business for the year is ₦250,000250,000, what is the amount of rent to be apportioned to Department X?

Answer: 150000 ₦

Answer

Department X is allocated ₦150,000 of the total rent expense based on floor space occupied.
Rent expense is apportioned using floor space occupied. The total floor area is 1,200 m2+800 m2=2,000 m21,200\text{ m}^2 + 800\text{ m}^2 = 2,000\text{ m}^2. Department X occupies 1,200 m21,200\text{ m}^2, which represents 1,2002,000=35\frac{1,200}{2,000} = \frac{3}{5} of the total area. Multiplying ₦250,000×35\text{₦}250,000 \times \frac{3}{5} gives ₦150,000.

Step-by-Step Solution

1
Calculate the total floor area used as the basis of apportionment.
Total floor area = 1,200 m2+800 m2=2,000 m21,200\text{ m}^2 + 800\text{ m}^2 = 2,000\text{ m}^2.
Rent is an indirect expense equitable to apportion on the basis of floor space occupied by each department.
2
Determine Department X's proportion of the total floor area.
Department X fraction = 1,2002,000=0.60\frac{1,200}{2,000} = 0.60 (or 60%60\%).
To find the fraction of rent attributable to Department X.
3
Multiply total rent by Department X's floor area proportion.
Apportioned rent for Department X = ₦250,000×0.60=₦150,000\text{₦}250,000 \times 0.60 = \text{₦}150,000.
Applying the calculated proportion to total rent expense gives Department X's share.

Key Concept

Apportionment of expenses based on floor area occupied
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Topics

Allocation and Apportionment of Expenses among Departments

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