[The following information applies to the questions displayed below] National Bank has several departments that occupy both oors of a two-story...
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[The following information applies to the questions displayed below] National Bank has several departments that occupy both ﬂoors of a two-story building. The departmentalaccounting system has a single account, Building Occupancy Cost, in its ledger. The types and amounts ofoccupancy costs recorded in this account for the current period follow. Depreciation—Building $ 22,500Interest—Building mortgage 33,750Taxes—Building and land 10,000Gas (heating) expense 3,125Lighting expense 3,750Maintenance expense 6,875Total occupancy cost $ 80,000 The building has 5,000 square feet on each ﬂoor. In prior periods, the accounting manager merely dividedthe $80,000 occupanqr cost by 10,000 square feet to ﬁnd an average cost of $8 per square foot and thencharged each department a building occupancy cost equal to this rate times the number ofsquare feet that itoccupied. Diane Linder manages a first-ﬂoor department that occupies 1,000 square feet, and Juan Chiro manages asecond-floor department that occupies 1,900 square feet of ﬂoor space. In discussing the departmentalreports, the second-floor manager questions whether using the same rate per square foot for all departmentsmakes sense because the ﬁrst-floor space is more valuable. This manager also references a recent realestate study of average local rental costs for similar space that shows ﬁrst-floor space worth $30 per squarefoot and second~floor space worth $20 per square foot (excluding costs for heating, lighting, andmaintenance).