Cost Accounting, Student Value Edition Plus MyAccountingLab with Pearson eText -- Access Card Package (15th Edition)
15th Edition
ISBN: 9780133781106
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 15, Problem 15.27P
Single-rate, dual-rate, and practical capacity allocation. Preston Department Store has a new promotional program that offers a free gift-wrapping service for its customers. Preston’s customer-service department has practical capacity to wrap 5,000 gifts at a budgeted fixed cost of $4,950 each month. The budgeted variable cost to gift-wrap an item is $0.35. During the most recent month, the department budgeted to wrap 4,500 gifts. Although the service is free to customers, a gift-wrapping service cost allocation is made to the department where the item was purchased. The customer-service department reported the following for the most recent month:
- 1. Using the single-rate method, allocate gift-wrapping costs to different departments in these three ways:
Required
- a. Calculate the budgeted rate based on the budgeted number of gifts to be wrapped and allocate costs based on the budgeted use (of gift-wrapping services).
- b. Calculate the budgeted rate based on the budgeted number of gifts to be wrapped and allocate costs based on actual usage.
- c. Calculate the budgeted rate based on the practical gift-wrapping capacity available and allocate costs based on actual usage.
- 2. Using the dual-rate method, compute the amount allocated to each department when (a) the fixed-cost rate is calculated using budgeted fixed costs and the practical gift-wrapping capacity, (b) fixed costs are allocated based on budgeted fixed costs and budgeted usage of gift-wrapping services, and (c) variable costs are allocated using the budgeted variable-cost rate and actual usage.
- 3. Comment on your results in requirements 1 and 2. Discuss the advantages of the dual-rate method.
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The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year:
Budgeted costs of operating the copying facility for 400,000 to 600,000 copies:
Fixed costs per year $60,000
Variable costs 3 cents (.03) per copy
Budgeted long-run usage in copies per year:
Marketing Department 120,000 copies
Operations Department 380,000 copies
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Marketing Department was 80,000 copies and by the Operations Department was 360,000 copies.
If a single-rate cost-allocation method is used, what amount of copying facility costs will be budgeted for the Marketing
Department?
Select one:
a. $16,800
b. $18,000
c. $14,400
d. $3,600
ABC Co. has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year:
Budgeted costs of operating the copying facility for 400,000 to 600,000 copies:
Fixed costs per year $120,000
Variable costs 4 cents (.04) per copy
Budgeted long-run usage in copies per year:
Marketing Department 160,000 copies
Operations Department 340,000 copies
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Marketing Department was 110,000 copies and by the Operations Department was 370,000 copies. ABC Co. uses a dual rate system for allocating support costs.
1. Using the dual-rate cost allocation method, what is the amount of copying facility variable costs that will be allocated to the Operations Department?
2. Using the dual-rate cost allocation method, what is the…
The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year:
Budgeted costs of operating the copying facility
for 400,000 to 600,000 copies:
Fixed costs per year $64,000
Variable costs 5 cents (0.05) per copy
Budgeted long-run usage in copies per year:
Marketing Department 90,000 copies
Operations Department 310,000 copies
The Charmatz Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year:
Budgeted costs of operating the copying…
Chapter 15 Solutions
Cost Accounting, Student Value Edition Plus MyAccountingLab with Pearson eText -- Access Card Package (15th Edition)
Ch. 15 - Prob. 15.1QCh. 15 - Describe how the dual-rate method is useful to...Ch. 15 - How do budgeted cost rates motivate the...Ch. 15 - Give examples of allocation bases used to allocate...Ch. 15 - Why might a manager prefer that budgeted rather...Ch. 15 - To ensure unbiased cost allocations, fixed costs...Ch. 15 - Prob. 15.7QCh. 15 - What is conceptually the most defensible method...Ch. 15 - Distinguish between two methods of allocating...Ch. 15 - Prob. 15.10Q
Ch. 15 - What is one key way to reduce cost-allocation...Ch. 15 - Describe how companies are increasingly facing...Ch. 15 - Distinguish between the stand-alone and the...Ch. 15 - Identify and discuss arguments that individual...Ch. 15 - Prob. 15.15QCh. 15 - Prob. 15.16ECh. 15 - Prob. 15.17ECh. 15 - Prob. 15.18ECh. 15 - Prob. 15.19ECh. 15 - Prob. 15.20ECh. 15 - Prob. 15.21ECh. 15 - Prob. 15.22ECh. 15 - Allocation of common costs. Evan and Brett are...Ch. 15 - Prob. 15.24ECh. 15 - Prob. 15.25ECh. 15 - Prob. 15.26ECh. 15 - Single-rate, dual-rate, and practical capacity...Ch. 15 - Prob. 15.28PCh. 15 - Prob. 15.29PCh. 15 - Prob. 15.30PCh. 15 - Prob. 15.31PCh. 15 - Prob. 15.32PCh. 15 - Prob. 15.33PCh. 15 - Prob. 15.34PCh. 15 - Prob. 15.35PCh. 15 - Prob. 15.36P
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