AirBome is a small airline operating out of Boise, Idaho. Its three flights travel to Salt Lake
Question:
AirBome is a small airline operating out of Boise, Idaho. Its three flights travel to Salt Lake City, Reno, and Portland. The owner of the airline wants to assess the full cost of operating each flight. As part of this assessment, the costs of two support departments (Baggage and Maintenance) must be allocated to the three flights. The two support departments that sup¬
port all three flights are located in Boise (any baggage or maintenance costs at the destina¬
tion airports are directly traceable to the individual flights). Budgeted and actual data for the year are as follows for the support departments and the three flights:
Required:
1. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to determine the cost of operating each flight.
2. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to evaluate performance. Do any costs remain in the two support de¬
partments after the allocation? If so, how much? Explain.
Step by Step Answer:
Cost Management Accounting And Control
ISBN: 9780324002324
3rd Edition
Authors: Don R. Hansen, Maryanne M. Mowen