Question

Grassley Corporation allocates administrative costs on the basis of staff hours. Short-run monthly usage and anticipated long-run monthly usage of staff hours for Operating Departments 1 and 2 follow. Department 1 Department 2 Total Short-run usage (hours) 40,000 60,000 100,000 Long-run usage (hours) 45,000 55,000 100,000 If Grassley uses dual-cost accounting procedures and variable administrative costs total $200,000, the amount of variable administrative cost to allocate to Department 1 would be

Answer 1

Answer:

$80,000

Explanation:

Calculation to determine what the amount of variable administrative cost to allocate to Department 1 would be

Variable administrative cost to allocate to Department 1=(40,000 ÷100,000) x $200,000

Variable administrative cost to allocate to Department 1=0.4×$200,000

Variable administrative cost to allocate to Department 1= $80,000

Therefore The Variable administrative cost to allocate to Department 1 would be $80,000