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?

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Definitions:

Conservation

A cognitive ability, identified by Piaget, that enables a child to understand that substances remain the same in quantity even when their shapes change.

Development

The process of change and growth through which an individual or entity progresses by gaining physical, mental, or societal qualities over time.

Egocentrism

A cognitive bias where an individual is unable to see a situation from another person’s point of view, common in early childhood development.

Object Permanence

The understanding that objects continue to exist even when they cannot be observed (seen, heard, touched, smelled, or sensed in any way).