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A. Suppose support costs were not broken down into fixed and variable cost pools. What allocation base would you use to allocate the costs for
A. Suppose support costs were not broken down into fixed and variable cost pools. What allocation base would you use to allocate the costs for each support department? Explain.
B. Describe several possible reasons why the managers of Vines Company allocate support costs to operating departments.
C. Discuss whether a dual-rate support cost allocation system is likely to be better for Vines Company than a single-rate system.
Vines Company is a manufacturer of women's and men's swimsuits. The company uses a dual-rate system to allocate support costs. Last year's support departments' fixed and variable costs are as follows: Human Accounting Resources Janitorial 22,104 $ 100,696 Total Variable costs $ 18,420 $ 55,260 60,360 $100,884 60,360 Fixed costs 216,316 Total costs 73,680 $ 122,800 $ 120,720 $317,200 $ Allocation base amounts for all the departments are as follows: Human Accounting Resources Janitorial Women's 10 Men's Total Employees Time spent for accounting Time spent cleaning Square metres Direct costs 2 2 4 6 24 20% 15% 10% 30% 25% 100% 100% 5% 10% 15% 30% 40% 80 100 120 500 500 1,300 $ 73,680 $ 122,800 120,720 800,000 $500,000 $1,617,200Step by Step Solution
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