Single-rate method, budgeted versus actual costs and quantities. Chocolat Inc. is a producer of premium chocolate based
Question:
Both locations are the same distance from Chocolats Owen Sound plant. Chocolat Inc. operates a fleet of trucks as a cost centre that charges the divisions for variable costs (drivers and fuel) and fixed costs (vehicle amortization, insurance, and registration fees) of operating the fleet. Each division is evaluated on the basis of its operating income. For 2013, the trucking fleet had a practical capacity of 50 round trips between the Owen Sound plant and the two suppliers. It recorded the following information:
REQUIRED
1. Using the single-rate method, allocate costs to the Dark Chocolate Division and the Milk Chocolate Division in these three ways:
a. Calculate the budgeted rate per round trip and allocate costs based on round trips budgeted for each division.
b. Calculate the budgeted rate per round trip and allocate costs based on actual round trips used by each division.
c. Calculate the actual rate per round trip and allocate costs based on actual round trips used by each division.
2. Describe the advantages and disadvantages of using each of the three methods in requirement 1. Would you encourage Chocolate Inc. to use one of these methods? Explain and indicate any assumptions you made.
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ