Question:
Assume that Tiffany’s parents rent a store for $7,500 per month. Different types of toys use different amounts of store space. For example, displaying a bicycle requires more store space than displaying a deck of cards. Also, some toys remain on the shelf longer than others. Fad toys sell quickly, but traditional toys sell more slowly. Under these circumstances, how would you determine the amount of rental cost required to display each type of toy? Identify two other costs incurred by a toy store that may be difficult to allocate to individual toys.
Answer:
We will allocate the store rent on the basis of floor space used by each type of toys.
Two other costs incurred by a toy store may be difficult to allocate to individual toy are the electricity costs and insurance costs for the store
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