Chapter 7 Question 1
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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 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 $61 per hour of professional time. The normal usage of the legal services center is 2,820 hours per year for the Yuma office and 1,880 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 $177,300 and actual variable costs of $236,870. It delivered 3,870 hours of professional time 2,150 hours to Yuma and 1,720 hours to Bernalillo. Determine the amount of the legal services center's costs that should be allocated to each office. 4. Did the costs allocated differ from the costs incurred by the legal services center? If so, why? 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 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 $61 per hour of professional time. The normal usage of the legal services center is 2,820 hours per year for the Yuma office and 1,880 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 $177,300 and actual variable costs of $236,870. It delivered 3,870 hours of professional time 2,150 hours to Yuma and 1,720 hours to Bernalillo. Determine the amount of the legal services center's costs that should be allocated to each office. 4. Did the costs allocated differ from the costs incurred by the legal services center? If so, why
