AirBorne 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

(maintenance and baggage) must be allocated to the three flights. The two support departments that support all three flights are located in Boise (any maintenance or baggage costs at the destination 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:

Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar.
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 departments after the allocation? If so, how much? Explain.LO1

Transcribed Image Text:

Support Centers Flights Maintenance Baggage Salt Lake City Reno Portland Budgeted data: Fixed overhead $240,000 $150,000 $20,000 $18,000 $30,000 Variable overhead $30,000 $64,000 $5,000 $10,000 $6,000 Hours of flight time* 2,000 4,000 2,000 Number of passengers 10,000 15,000 5,000 Actual data: Fixed overhead $235,000 $156,000 $22,000 $17,000 $29,500 Variable overhead $80,000 $33,000 $6,200 $11,000 $5,800 Hours of flight time 1,800 4,200 2,500 Number of passengers 8,000 16,000 6,000