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Q1) AC Corporation operates one central plant which has two divisions, Flashlight Division and the Night Light Division. Following data apply to coming budget year:

Budgeted costs of the operating the plant for 10,000 to 20,000 hours:

Fixed operating costs per year $240,000
Variable operating costs $10 per hour
Practical capacity 20,000 hours per year

Budgeted long-run usage per year:

Lamp Division 800 hours × 12 months = 9,600 hours per year
Flashlight Division 450 hours × 12 months = 5,400 hours per year

Suppose that practical capacity is utilized to compute allocation rates. Further suppose that actual usage of Lamp Division was 700 hours and Flashlight Division was 400 hours for month of June.

Required:

a. If single-rate cost-allocation method is utilized, compute amount of operating costs will be budgeted for Lamp Division each month? For Flashlight Division each month?

b. For month of June, if single-rate cost-allocation method isutilized , determine amount of cost will be assigned to Lamp Division? To Flashlight Division? Suppose actual usage is used to assign operating costs.

c. If dual-rate cost-allocation method is utilized, compute amount of operating costs will be budgeted for Lamp Division each month? For Flashlight Division each month?

d. For month of June, if dual-rate cost-allocation method is used, compute amount of cost will be allocated to  Lamp Division? To Flashlight Division? Suppose budgeted usage is utilized to assign fixed operating costs and actual usage is used to assign variable operating costs.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M918055

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