Mahoney & Levine is an accounting firm serving its customers in the areas of Audit, Tax and Management Advisory Services. In 2019, a new photocopying department was established. Before deciding on the size and capacity of the photocopying service each unit was asked to predict their annual and monthly peak usage. Estimated annual usage (in pages) for each department was as follows

Audit Department	94,500
Tax Department	67,500
MAS Department	108,000

The Audit and MAS departments reported that their usage was distributed evenly throughout the year, with an estimated monthly usage of 7,875 and 9,000 pages, respectively. In contrast to the Audit and MAS departments, the Tax department indicated that one-third of its annual usage will occur in the month of April with 22,500 pages.

Based on this information, Mahoney & Levine decided to lease a high capacity photocopy machine and hire a person for the photocopy services. The costs associated with the Photocopying Department were as follows:

                       Fixed Costs (Machine Rental, Salaries): $26,190 per year

                       Variable Costs (paper and toner): $0.023 per page copied

The following budgeted and actual information is obtained:

	Estimated (budgeted) Yearly Pages	Actual Usage in Year
Audit Department	94,500	92,000
Tax Department	67,500	65,000
MAS Department	108,000	115,000
Total Pages	270,000	272,000

Required:

Discuss various alternatives for fair allocation of the photocopying department costs between Audit, Tax and MAS departments.

Answer rating: 100% (QA)

ALLOCATION OF COST TO DIFFERENT DEPARTMENTS USING MULTIPLE CHARGING RATE METHOD Note Var... View the full answer