Question

Halo Beverages has two divisions, North and South, which share the common costs of the company's computer support. The total cost of computer support is $4,000,000 a year. The North Division fields 3,800 help desk calls per year and uses 18,200 hours of network time. The South Division fields 4,200 desk help calls per year and uses 21,800 hours of network time. What is the amount of cost that will be allocated to the North Division if fixed computer support costs of $2,500,000 are allocated on the basis of number of calls and the remaining costs (all variable) are allocated on the basis of number of hours on the network

Answer 1

Answer: $1,870,000

Explanation:

Total cost of computer support = $4,000,000

North division = 3800 calls per year

North division = 18,200 hours network time

South division = 4200 calls per year

South division = 21,800 hours network time

Total amount allocated on basis of number of calls = $2,500,000

Tot allocated on basis of network time =

$4,000,000 - $2,500,000 = $1,500,000

Total amount allocated to North division =

[(2,500,000/(3800+4200)) × 3800] + [(1,500,000 / (18,200+21,800)) × 18,200]

(312.5 × 3800) + (37.5 × 18200)

$1,187,500 + $682500 = $1,870,000

$1,870,000