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attashe74 [19]
3 years ago
10

Standard Aluminum Company is planning to lease CNC equipment for its production and finishing departments. Currently, the produc

tion and finishing departments lease the equipment separately and pay $410,000 and $360,000, respectively, as lease charges. If both the departments lease the equipment jointly, the contract will be reduced by $100,000. The managers of the finishing department want to know the cost that will be allocated to them under the stand-alone cost-allocation method. What will be the cost allocated to the finishing department?
Business
2 answers:
Komok [63]3 years ago
6 0

Answer:

The cost allocated to the finishing department is $313,246.75  

Explanation:

The stand-alone cost allocation to be charged to finishing department would the initial separate costs less the reduction of $100,000 in total leasing costs as a result joint leasing apportioned based on the original lease cost of each department.

The total costs incurred initially=$410,000+$360,000

                                                    =$770,000

Reduced costs of joint leasing=$770,000-$100,000

                                                  =$670,000

This reduced cost can be shared on the basis of original leasing costs

Production $670,000*$410,000/($410,000+$360,000)=$356,753.25

Finishing  $670,000*$360,000/($410,000+$360,000)=$313,246.75  

Rom4ik [11]3 years ago
4 0

Answer: $313,247

Explanation:

Independent lease cost :

Production department = $410,000

Finishing department = $360,000

Joint lease cost = $(410,000 + 360,000) - $100,000 = $670,000

Using the standard alone cost allocation method ;

Finishing department percentage is given by;

Finishing department independent cost ÷ (finishing department independent cost + production department independent cost)

$360,000 ÷ ($360,000 + $410,000)

$360,000 ÷ $770,000

0.4675324467 = 46.75324467%

Therefore, finishing department share of the joint lease cost will be ;

0.4675324467 × $670,000 = $313,246. 73

$313,247

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