Biden Department Store Has Four Departments: Men's, Women's, Children's, and Electronics

question 68

Essay

Biden Department Store has four departments: men's, women's, children's, and electronics. The following information is provided: $$\begin{array} { | l | l | l | l | l | } \hline & \text { Men's } & \text { Women's } & \text { Children's } & \text { Electronics } \\\hline \text { Floor space } & 10,000 \text { sq. ft. } & 20,000 \text { sq. ft. } & 8,000 \text { sq. ft. } & 2,000 \text { sq. ft. } \\\hline \text { Sales } & \$ 35,000 & \$ 75,000 & \$ 20,000 & \$ 12,000 \\\hline\end{array}$$
The company's accountant needs to allocate the store's annual rent of $160,000.
Required:
1) Compute the allocation rate that should be used to allocate the rent cost to the four departments.
2) Compute 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?