Bally Company is a conglomerate with multiple divisions manufacturing unrelated prod¬

ucts. Bally has decided to set up a corporate Legal Department to handle all legal matters for Bally and certain routine legal matters for the divisions (e.g., patent applications). The new corporate Legal Department has estimated fixed costs of $210,000 per year and vari¬

able costs of $14 per hour. Four divisions have indicated willingness to use the new Legal Department and have budgeted the following annual time requirements:

After the first year of operations, the Legal Department had actual fixed costs of $215,000 and variable costs of $83,145. The actual time usage of the Legal Department by the four di¬ visions was:

Required:
1. Using the single rate method, develop a charging rate for the Legal Department. Using this rate and actual usage, how much was charged to the four divisions over the course of the first year?

2. Using the dual rate method, develop a charging rate for the Legal Department to be used for product costing. Using the dual rate, how much was charged to the four di¬
visions over the course of the first year?
3. Using the dual rate method, evaluate the performance of the Legal Department for the first year. Did the department come in over or under budget and by how much?
4. Explain which charging method you think should be used.

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