Question

Brandon Consulting Company is headquartered in Atlanta and has branch offices in Nashville and Birmingham. Brandon uses an activity-based costing system. The Atlanta office has its costs for Administration and Legal allocated to the two branch offices. Brandon has provided the following information: Activity Cost Pool Cost Driver Costs Administration % of time devoted to branch $700,000 Legal Hours spent on legal research $138,000 % of time devoted to branch Hours spend on legal research Nashville 80% 18,000 Birmingham 20% 6,000 How much of Atlanta’s cost will be allocated to Nashville? $628,500 $663,500 $670,400 None of these answer choices are correct

Answer 1

Answer:

The Atlanta's cost allocated to Nashville will be $663,500.

Explanation:

Administration: $700,000 x 80% = $560,000

Legal: $138,000 x [18,000 ÷ (18,000 + 6,000)] = $103,500

Solution: $560,000 + $103,500 = $663,500.