ACG 3357 American College of Greece Cost Allocation discussion

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Business Finance

Description

Blue Inc.'s copy department does all of the photocopying for the marketing and human resources departments. Blue Inc. budgets the following costs for the coming year based on 5,000,000 copies:

Salaries and wages (fixed)
$60,000
Employee Benefits (fixed)
$8,000
Paper (variable $.01 per copy)
$50,000
Toner (variable $.01 per copy)
$50,000
Depreciation (fixed)
$10,000
Utilities (fixed)
$4,000
Total
$182,000

The copy department's costs are allocated to the marketing and human resources departments based on $.037 per copy.

    1. If actual copies made are 4,800,000 what are the costs allocated to each department assuming the marketing department requested 2,500,000 copies and HR requested 2,300,000 copies.
    2. What are the problems with using one allocation rate for the copy department's costs?
    3. Devise a better allocation system based on pooling costs. Show how the costs would be allocated based on your new system.

Present your computations in this Excel spreadsheet with the answer to each of the requirements on a SEPARATE TAB.

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If actual copies made are 4,800,000 what are the costs allocated to each department assuming the marketing Salaries and wages (fixed) Employee Benefits (fixed) $8.000 Paper (variable $.01 per copy) $50.000 Toner (variable $.01 per copy) $50.000 Depreciation (fixed) $10.000 Utilities (fixed) Total $4.000 $182.000 Marketing Department # of copies made costs (.037) (# of copies made X .37) $60.000 HR Department Total 4.800.000 Note: not all of the $182,000 co suming the marketing department requested 2,500,000 copies and HR requested 2,300,000 copies. What are the problems with using one allocation rate for the copy department’s costs? Devise a better allocation system based on pooling costs. Show how the costs would be allocated based on you Allocate based on two pools-one for fixed costs one for variable Salaries and wages (fixed) $60.000 Employee Benefits (fixed) $8.000 Paper (variable $.01 per copy) $50.000 Toner (variable $.01 per copy) $50.000 Depreciation (fixed) $10.000 Utilities (fixed) Total Total Fixed Costs Variable Costs $4.000 $182.000 Total Copies Cost per copy $82.000 5.000.000 $0,016 $ 0,02 Marketing HR 2.500.000 2.300.000 $0 $0 uld be allocated based on your new system. total 4.800.000 0
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Explanation & Answer

Attached.

If actual copies made are 4,800,000 what are the costs allocated to each department assuming the marketing departm
Salaries and wages (fixed)
Employee Benefits (fixed)
Paper (variable $.01 per copy)
Toner (variable $.01 per copy)
Depreciation (fixed)
Utilities (fixed)
Total

$60,000
$8,000
$50,000
$50,000
$10,000
$4,000
$182,000...


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