Question 6.2 The Lawn Patrol Corporation has two divisions, the Lawnmower Division and the Landscaping Division, which both operate under one plant. The following data apply to the coming budget year: Budgeted costs of the operating the plant for 4,000 to 8,000 hours: Fixed operating costs per year $280,000 Variable operating costs $15 per hour Practical capacity 7,000 hours per year Budgeted long-run usage per year: Lawnmower Division 325 hours × 12 months = 3,900 hours per year Landscaping Division 150 hours × 12 months = 1,800 hours per year Assume that practical capacity is used to calculate the allocation rates. Further assume that actual usage of the Lawnmower Division was 350 hours and the Landscaping Division was 200 hours for the month of June. Required If a single-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lawnmower Division each month? For the Landscaping Division each month? For the month of June, if a single-rate cost allocation method is used, what amount of cost will be allocated to the Lawnmower Division? To the Landscaping Division? Assume actual usage is used to allocate operating costs. If a dual-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lawnmower Division each month? For the Landscaping Division each month? For the month of June, if a dual-rate cost allocation method is used, what amount of cost will be allocated to the Lawnmower Division? To the Landscaping Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question 6.2
The Lawn Patrol Corporation has two divisions, the Lawnmower Division and the Landscaping Division, which both operate under one plant. The following data apply to the coming budget year:
Budgeted costs of the operating the plant for 4,000 to 8,000 hours:
Fixed operating costs per year $280,000
Variable operating costs $15 per hour
Practical capacity 7,000 hours per year
Budgeted long-run usage per year:
Lawnmower Division 325 hours × 12 months = 3,900 hours per year
Landscaping Division 150 hours × 12 months = 1,800 hours per year
Assume that practical capacity is used to calculate the allocation rates. Further assume that actual usage of the Lawnmower Division was 350 hours and the Landscaping Division was 200 hours for the month of June.
Required
- If a single-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lawnmower Division each month? For the Landscaping Division each month?
- For the month of June, if a single-rate cost allocation method is used, what amount of cost will be allocated to the Lawnmower Division? To the Landscaping Division? Assume actual usage is used to allocate operating costs.
- If a dual-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lawnmower Division each month? For the Landscaping Division each month?
- For the month of June, if a dual-rate cost allocation method is used, what amount of cost will be allocated to the Lawnmower Division? To the Landscaping Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.
Step by step
Solved in 2 steps