Billy Stone, Inc., budgets the following amounts for its Buildings & Grounds and Computer Services Departments in servicing each other and the two manufacturing divisions of Signs and Mailers:

Used By
Supplied By	Building & Grounds	Computer Services	Signs	Mailers
Buildings & Grounds		0.2	0.6	0.2
Computer Services	0.15		0.3	0.55
The actual results for the time period were as follows:
Used By
Supplied By	Building & Grounds	Computer Services	Signs	Mailers
Buildings & Grounds		0.1	0.6	0.3
Computer Services	0.25		0.35	0.4

Actual cost data for each department are:

	Fixed	Variable
Buildings & Grounds	$ 50,000	$90,000
F Computer Services	$100,000	$21,000

Total fixed costs allocated from Buildings & Grounds to the Signs Department, using the preferred allocation basis, by the direct allocation method are

a.   $37,500.                     

b.   $33,333.                                       

c.   $30,000.                     

d.   $25,000.

e.     none of the above

Total variable costs allocated from Computer Services and Building & Grounds to Mailers Department, using the preferred allocation basis, by the step-down allocation method (begin with Building & Grounds) are

a.   $8,400.                                         

b.   $12,000.                                       

c.   $16,000.                     

d.   $25,235.

e.     none of the above

The equation to determine the total variable costs of Computer Services using the preferred allocation basis, for the reciprocal allocation method is

1. CS = $21,000 + 0.25 B&G.                                        
2. CS = $21,000 + 0.20 B&G.    
3. CS = $21,000 + 0.15 B&G.
4. CS = $21,000 + 0.10 B&G.

Based on the reciprocal allocation method, determine the total variable costs allocated to SIGNS using the preferred allocation basis.

Answer rating: 100% (QA)

Total Fixed Cost allocated from BG deptt to Sign by Direct Allocation Method Actual Fi... View the full answer