Allocation: Fixed and Variable Costs, Budgeted Fixed and Variable Costs

Biotechtron, Inc., has two research laboratories in the Southwest, one in Yuma, Arizona, and the other in Bernalillo, New Mexico. The owner of Biotechtron centralized the legal services function in the Yuma office and had both laboratories send any legal questions or issues to the Yuma office. The legal services support center has budgeted fixed costs of $175,000 per year and a budgeted variable rate of $66 per hour of professional time. The normal usage of the legal services center is 2,925 hours per year for the Yuma office and 1,575 hours per year for the Bernalillo office. This corresponds to the expected usage for the coming year.

Required:

1. Determine the amount of legal services support center costs that should be assigned to each office. In your computations, carry ratio values out to two decimal places. Round your final answers to the nearest dollar if rounding is required.

2. Since the offices produce services, not tangible products, what purpose is served by allocating the budgeted costs?

3. Now, assume that during the year, the legal services center incurred actual fixed costs of $178,300 and actual variable costs of $254,740. It delivered 3,840 hours of professional time2,270 hours to Yuma and 1,570 hours to Bernalillo.

Determine the amount of the legal services center's costs that should be allocated to each office.