Question

Organic Laboratories allocates research and development costs to its three research facilities based on each facility's total annual revenue from new product developments:______.
Facility location Kentucky Arizona Illinois Total New product revenue $ 56,000,000 $ 100,000,000 $ 84,000,000 $ 240,000,000
Research & Development $ 90,000,000
Using revenue as an allocation base, the amount of costs allocated to the Illinois research facility is calculated to be:_______.

Answer 1

Answer:

Amount of costs allocated to the Illinois research facility = $31,500,000

Explanation:

Given:

Research cost    

Kentucky = $56,000,000

Arizona = $100,000,000

Illinois = $84,000,000

Research and development cost = $90,000,000

Find:

Amount of costs allocated to the Illinois research facility

Computation:

Amount of costs allocated to the Illinois research facility = Research cost of Illinois[Research and development cost / Total research cot]  

Amount of costs allocated to the Illinois research facility = 84,000,000[90,000,000 / (56,000,000 + 100,000,000 + 84,000,000)]

Amount of costs allocated to the Illinois research facility = 84,000,000[90,000,000 / (240,000,000)]

Amount of costs allocated to the Illinois research facility = 84,000,000[0.375]

Amount of costs allocated to the Illinois research facility = $31,500,000