15-18 Single-rate method, budgeted versus actual costs and quantities. Chocolat Inc. is a producer
of premium chocolate based in Owen Sound. The company has a separate division for each of its two
products: dark chocolate and milk chocolate. Chocolat purchases ingredients from Toronto for its dark
chocolate division and from Barrie for its milk chocolate division. Both locations are the same distance from
Chocolats Owen Sound plant.
Chocolat Inc. operates a fleet of trucks as a cost centre that charges the divisions for variable costs (drivers
and fuel) and fixed costs (vehicle amortization, insurance, and registration fees) of operating the fleet. Each
division is evaluated on the basis of its operating income. For the year, the trucking fleet had a practical capacity
of 60 round trips between the Owen Sound plant and the two suppliers. It recorded the following information:
				Budgeted	Actual
Costs of truck fleet				$120,000	$112,750
Number of round trips for dark chocolate
division (Owen Sound plantToronto)				35	30
Number of round trips for milk chocolate				25	25
division (Owen Sound plantBarrie)
Required
1. Using the single-rate method, allocate costs to the dark chocolate division and the milk chocolate
division in these three ways:
a. Calculate the budgeted rate per round trip and allocate costs based on round trips budgeted for
each division.
b. Calculate the budgeted rate per round trip and allocate costs based on actual round trips used by
each division.
c. Calculate the actual rate per round trip and allocate costs based on actual round trips used by each
division.
2. Describe the advantages and disadvantages of using each of the three methods in requirement 1.
Would you encourage Chocolat Inc. to use one of these methods? Explain and indicate any assumptions
you made.