allocation The Alex Miller Corporation operates one central plant that has two divisions, the Flashlight Division...

  

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allocation The Alex Miller Corporation operates one central plant that has two divisions, the Flashlight Division and the Lamp Division. The following data apply to the coming budget year: Budgeted costs of the operating the plant for 10,000 to 20,000 hours: Fixed operating costs per year Variable operating costs $240,000 $10 per hour Practical capacity 20.000 hours per year Budgeted long-run usage per year. 800 hours 12 months -9,600 hours per year Lamp Division Flashlight Division 450 hours x 12 months 5,400 hours per year Assume that practical capacity is used to calculate the allocation rates. Further assume that actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400 hours for the month of June. Required: 1. If a single-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month? (base the rates on practical capacity) (2 marks) allocation The Alex Miller Corporation operates one central plant that has two divisions, the Flashlight Division and the Lamp Division. The following data apply to the coming budget year: Budgeted costs of the operating the plant for 10,000 to 20,000 hours: Fixed operating costs per year Variable operating costs $240,000 $10 per hour Practical capacity 20.000 hours per year Budgeted long-run usage per year. 800 hours 12 months -9,600 hours per year Lamp Division Flashlight Division 450 hours x 12 months 5,400 hours per year Assume that practical capacity is used to calculate the allocation rates. Further assume that actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400 hours for the month of June. Required: 1. If a single-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month? (base the rates on practical capacity) (2 marks)

Answer rating: 100% (QA)

Advantages of using practical capacity to calculate the cost allocation rates 1 Fairness and Equity Using practical capacity ensures that the cost all... View the full answer