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Q1) Conan Company's monthly activity level ranged from low of 17,000 units in May to high of 26,000 units in October. Average production was 20,000 units per month. Utilities cost was $8,250 in May and $10,500 in October. Variable utility cost per unit, to nearest cent, is:

 

a) $0.49

 

b) $0.47

 

c) $0.25

 

d) $0.40

 

Q2) Copy Department of Cadiz Company is budgeted to acquire $40,000 per month in fixed costs and $0.02 per copy in variable costs.  It assigns copy costs to user departments as follows: Fixed costs are allocated (as a lump sum) based on budgeted fixed costs and estimated peak demand for each department. Variable costs are allocated based on the budgeted rate per copy times the department's actual usage.  Which of the given is not the advantage of this allocation scheme over allocating actual costs based on actual usage?

 

a) Amount charged to one using department is not affected by number of copies used by another department.

 

b) Managers in using departments pay for fixed costs which are created by their demands for capacity.

 

c) Using departments are not charged for cost overruns in copy department.

 

d) All of above are advantages of this allocation system.

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