Answered: How much of the headquarters cost…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 6E: Varney Corporation, a manufacturer of electronics and communications systems, allocates Computing...

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Founder Consulting Corporation has its headquarters in Memphis and operates from three branch offices in Nashville, Atlanta, and Louisville. Two of the company's activity cost pools are Administrative Service and Development Service. These costs are allocated to the three branch offices using an activity-based costing system. Information for next year follows:

Activity Cost Pool	Activity Measure	Estimated Cost
Administrative service	% of time devoted to branch		$	1,680,000
Development service	Computer time		$	630,000

Estimated branch data for next year is as follows:

	Time to branch		Computer time
Nashville		70	%	1,600,000	minutes
Atlanta		20	%	1,200,000	minutes
Louisville		10	%	400,000	minutes
Total		100	%	3,200,000	minutes

How much of the headquarters cost allocation should Nashville expect to receive next year?

Founder Consulting Corporation has its headquarters in Memphis and operates from three branch offices in Nashville, Atlanta, and Louisville. Two of the company's
activity cost pools are Administrative Service and Development Service. These costs are allocated to the three branch offices using an activity-based costing
system. Information for next year follows:
Activity Cost Pool
Administrative service
Activity Measure
Estimated Cost
% of time devoted to branch
$1,680,000
Development service
Computer time
$ 630,000
Estimated branch data for next year is as follows:
Time to
Computer time
branch
Nashville
70%
1,600,000 minutes
Atlanta
20%
1,200,000 minutes
Louisville
10%
400,000 minutes
Total
100%
3,200,000 minutes
How much of the headquarters cost allocation should Nashville expect to receive next year?

Multiple Choice
$1,806,000
$1,662,000
$651,000
$1,491,000
$1,412,250

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