CMA Intermediate · Cost Accounting · Overheads
Sharma Engineering Ltd. incurred factory rent of Rs 1,80,000 for a building shared by three departments. Floor areas are: Cutting 2,000 sq. ft., Assembly 3,000 sq. ft., Stores 1,000 sq. ft. Rent is apportioned on floor area. What amount of rent is charged to Assembly?
Assembly is charged Rs 90,000. Total floor area is 6,000 sq. ft., so rent works out at Rs 30 per sq. ft., and Assembly's 3,000 sq. ft. bears half of the Rs 1,80,000. Equal sharing would wrongly give Rs 60,000.
- ARs 60,000
- BRs 90,000Correct
- CRs 1,20,000
- DRs 45,000
Explanation
Total area = 2,000 + 3,000 + 1,000 = 6,000 sq. ft. Rent per sq. ft. = 1,80,000 / 6,000 = Rs 30. Assembly = 3,000 x 30 = Rs 90,000. Rs 60,000 results from equal sharing among the three departments, which ignores the area basis.
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