Question

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 5 cents(0.05) per copy. Budgeting long run usage in copies per year: Marketing Department 900 copies.Operations department 310,000 copies.Budgeting amounts are used to calculate the allocation rates. Actual usage for the year by the marketing Department was 120,000 copies and by the Operation Department was 380,000 copies. If a dual-rate cost-allocation method is used, what amount of copying facility costs will be budgeted for the Operations Depatment.

Answer 1

Answer:

Total cost for Operations Department = 92,548

Explanation:

Dual-rate method is a method of allocating costs in which two cost functions are used. Typically, the two functions are a fixed-cost function and a variable-cost function.

First calculate allocation rate for fixed cost for Operations Department

Fixed cost  = 60000

Budgeted copies = 310000

Fixed allocation rate = 60000 ÷ 310000

                                  = $ 0.1935483870967742‬ per copy............eq(2)

Variable cost = $ 0.05 per copy............ eq(1)

Actual usage by Operations department was 380000 copies.

Multiply this amount with allocation rates calculated in eq(1) and e1(2).

Actual fixed cost = 0.1935483870967742 × 380000

                            = 73548

Actual variable cost = 0.05 × 380000

                                  = 19000

Total cost for Operations Department = 73548 + 19000

                                                                = 92,548