Dual-rate method, budgeted versus actual costs, and practical capacity versus actual quantities (continuation of 14-18). Chocolat Inc. decides to examine the effect of using the dual-rate method for allocating truck costs to each round trip. At the start of 2013, the budgeted costs were:
Variable cost per round trip .................. $ 1,500
Fixed costs ....................... $40,000
The actual results for the 45 round trips made in 2013 were:
Variable costs ...................... $60,750
Fixed costs ........................ $36,000
$96,750
Assume all other information to be the same as in Exercise 14-18.
REQUIRED
1. Using the dual-rate method, what are the costs allocated to the Dark Chocolate Division and the Milk Chocolate Division when (a) variable costs are allocated using the budgeted rate per round trip and actual round trips used by each division, and when (b) fixed costs are allocated based on the budgeted rate per round trip and round trips budgeted for each division?
2. From the viewpoint of the Dark Chocolate Division, what are the effects of using the dual-rate method rather than the single-rate method?