Single-rate cost allocation method, budgeted versus actual costs and quantities. Fruit uice, Inc., processes orange juice at its East Miami plant and grapefruit juice at its West Miami plant. It purchases oranges and grapefruit from growers’ cooperatives in the Orlando area. It owns its own trucking fleet. Both Miami plants are the same distance from Orlando.

The trucking fleet is run as a cost centre. Each Miami plant is billed for the direct costs and the indirect costs of each return trip.

The trucking fleet costs include direct costs (labour costs of drivers, fuel, and toll charges) and indirect costs. Indirect costs include wear and tear on tires and the vehicles, leas¬

ing costs, insurance, and state registration fees.

At the start of 2006, the Orange Juice Division budgeted for 150 Orlando to East Miami truck trips, while the Grapefruit Juice Division budgeted for 100 Orlando to West Miami truck trips. On the basis of these 250 budgeted trips, the Trucking Fleet Division budgeted trucking fleet indirect costs of $590,000. The following actual results occurred for 2007:

Trucking fleet indirect costs $660,000 j $90,001!

Trips to East Miami plant 200 Trips to West Miami plant 100 The Trucking Fleet Division uses a single-rate method when allocating indirect trucking costs. The costs charged to each plant equal this rate times the actual number oftrips made.

Required 1. What is the indirect-cost rate per truck trip when

(a) budgeted costs and budgeted quantities

(trips) are used and

(b) actual costs and actual quantities (trips) are used? What dollar amount will be allocated to the Orange Juice Division and the GrapefruitJuice Division for Z'’ A

(a) and for (b)?

2. From the viewpoint of the Orange Juice Division, what are the effects of using budgeted costs/quantities rather than actual costs/quantities?