The Alex Miller Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year:
Budgeted costs of the operating the plant
for 10,000 to 20,000 hours:
Fixed operating costs per year $240,000
Variable operating costs $10 per hour
Practical capacity 20,000 hours per year
Budgeted long-run usage per year:
Lamp Division 800 hours × 12 months = 9,600 hours per year
Flashlight Division 450 hours × 12 months = 5,400 hours per year
Assume that practical capacity is used to calculate the allocation rates. Further assume that actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400 hours for the month of June.
1) If a dual-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month?
2) For the month of June, if a dual-rate cost allocation method is used, what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.
|Fixed cost=240000/20000||$12||per hour|
|Budgeted cost-Lamp division|
|No. of hours*(Fixed cost per hour+variable cost per hour)|
|Budgeted cost- Flashlight division||9900||per month|
|Allocated cost for June-Lamp division||16600||per month|
|Fixed cost+Variable cost|
|Allocated cost for June-Flashlight division||9400||per month|
|If any doubt please comment. If satisfied you can rate the answer|