Harlow Studios rents out its studio facilities to local marketing firms to produce advertisements. The cost accountant wants to allocate the costs incurred by the Janitorial department to the Filming and Post Production departments.

The manager of the Janitorial department determined at the beginning of the year that the annual fixed costs would be $247,500. She also determined that the cost for labour and cleaning supplies would be classified as variable costs and budgeted at $0.65 per square metre of floor space cleaned. At the end of the year, actual fixed costs were $520,000 and actual cost per square metre cleaned was $0.80.

The managers of the Filming and Post Production Departments provided the following information:

	Filming Department	Post Production Department
Budgeted floor space (Square metres)	112,500	25,000
Actual floor space cleaned (Square metres)	107,500	27,500

If a dual-rate cost allocation method is used, what amount of Janitorial department costs will be allocated to the Filming Department? Use the application methodology that best measures the responsible use of the copying facility’s services..

2. Jericho Inc. is a large logistics company that focuses on the efficient operations of its warehouses to speed the picking of customer orders for delivery. Through the use of intelligent robots and strategic placement of inventory, Jericho’s lead development team has determined the best way to layout its inventory so the amount of movement is limited. As such they have a very good understanding of which costs are variable and which costs are fixed.
   
   Explain which cost estimation method is being used by Jericho.
3. 
   
4. Pam's Stables used two different predictor variables (trainer hours and a number of horses) in two different equations to evaluate the cost of training horses. The most recent results of the two regressions are as follows:

Trainer's hours:

Variable	Coefficient	Standard Error	t-Value
Constant	953.32	2.093	4.44
Predictor Variable	20.90	2.844	3.50

r2 = 0.56

Number of horses:

Variable	Coefficient	Standard Error	t-Value
Constant	4964.50	0.812	4.61
Predictor Variable	864.98	0.294	3.40

r2 = 0.83

What is the estimated total cost for the coming year if 16,000 trainer hours are incurred and the stable has 400 horses to be trained, based on the best cost driver?

Answer rating: 100% (QA)

Budgeted floor space Squareis used to allocate fixed c... View the full answer