=+13-27 K Single-rate, dual-rate and practical capacity allocation OBJECTIVE 1 Grace’s Department Store has a new promotional program that offers a free gift-wrapping service for its customers. Grace’s Department Store’s customer-service department has practical capacity to wrap 7000 gifts at a budgeted fixed cost of $6650 each month. The budgeted variable cost to gift wrap an item is $0.40. Although the service is free to customers, a gift-wrapping service cost allocation is made to the department where the item was purchased. The customer-service department reported the following for the most recent month:

Chapter 13: Allocation of support-department costs, common costs and revenues 533 M13_HORN3377_02_LT_C13.indd 533 2/09/13 3:53 PM 1

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Men’s face wash Women’s face wash Department Body wash Fragrances Hair products Total Actual number of gifts wrapped 730 1560 545 1495 6350 2020 Budgeted number of gifts to be wrapped 825 1805 430 1120 6650 2470 Practical capacity available for gift wrapping 945 1970 650 795 7000 2640 C D Required 1 Using the single-rate method, allocate gift-wrapping costs to different departments in these three ways: