Sara's Candle Co is a medium-size company located in Toronto, Ontario. The company specializes in manufacturing and
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Question:
Sara's Candle Co is a medium-size company located in Toronto, Ontario. The company specializes in manufacturing and selling luxury soy candles richly scented with high quality fragrance oils.
To assure the quality of its products, the company established its quality assurance department. The annual costs of this department include $217,000 of fixed costs and $166,000 of variable costs.
For the fiscal 2022, the department estimated the annual budget to include 18,500 inspection hours. Inspections are required by the receiving and manufacturing departments. The receiving department budgeted 6,850 inspection hours, whereas the manufacturing department budgeted for the remaining hours.
Required:
- In March, the receiving department used 630 inspection hours and manufacturing used 1,035 hours. How much did each department receive in quality assurance costs assuming a single rate is used based on budgeted hours?
- In April, the receiving department used 590 inspection hours and manufacturing used 920 hours. How much did each department receive in quality assurance costs assuming a dual-rate is used with budgeted usage for fixed costs and actual usage for variable costs?
- Based on your analysis in part 1 and 2, which method would you recommend being used? Why?
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