Question

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Case study 1 Harrods department store has a new promotional program that offers a free gift-wrapping service for its customers. Harrods department store’s customer service department has practical capacity to wrap 7,000 gifts at a budgeted fixed cost of $6,650 each month. The budgeted variable cost to gift wrap an item is $0.40. Although the service is free to customers, a gift-wrapping service cost allocation is made to the department where the item was purchased. The customer service department reported the following for the most recent month:

Department	Actual Number of Gifts Wrapped	Budgeted Number of Gifts Wrapped	Practical Capacity available for Gift Wrapping
Women's Clothing	2020	2470	2640
Men's Clothing	730	825	945
Fragrances	1560	1805	1970
Body Wash	545	430	650
Hair Products	1495	1120	795
Total	6350	6650	7000

Required:

(2) Using the dual rate method, calculate the amount allocated to each department when the fixed cost rate is calculated using budgeted costs and the practical gift wrapping capacity while the fixed costs are allocated based on budgeted usage of gift wrapping services, and variable costs are allocated using the budgeted variable cost rate and actual usage.