Which method is typically used to allocate rent expenses to departments based on their square footage?

Which method is typically used to allocate rent expenses to departments based on their square footage?

• A. Equal allocation
• B. Revenue-based allocation
• C. Proportional allocation
• D. Cost-plus allocation

Answer: (C)

The option that typically allocates rent expenses to departments based on their square footage is proportional allocation. This method directly links the allocation of costs to the space each department occupies within a facility. By calculating the percentage of total square footage that each department uses, the organization can distribute the overall rent expense in a fair manner that reflects the actual space consumed. This approach is particularly effective because it ensures that departments contributing more to the overall usage of the premises are charged accordingly, which helps enhance transparency and accuracy in cost management. It is commonly used in scenarios where physical space is a significant factor in operational costs, making it a logical choice for rent allocation.

The option that typically allocates rent expenses to departments based on their square footage is proportional allocation. This method directly links the allocation of costs to the space each department occupies within a facility. By calculating the percentage of total square footage that each department uses, the organization can distribute the overall rent expense in a fair manner that reflects the actual space consumed.

This approach is particularly effective because it ensures that departments contributing more to the overall usage of the premises are charged accordingly, which helps enhance transparency and accuracy in cost management. It is commonly used in scenarios where physical space is a significant factor in operational costs, making it a logical choice for rent allocation.