ChocoMix Inc. is a producer of premium chocolate based in Palo Alto.

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For $2020,$ the trucking fleet had a practical capacity of $75$ round$-$trips between the Palo Alto plant and the two suppliers. It recorded

the following information:

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Read the requirements.

Requirement $1.$ 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.

The budgeted rate per round$-$trip is

This translates to indirect costs allocated to the dark chocolate division for

and milk chocolate division for

More info

The company has a separate division for each of its two products: dark chocolate

and milk chocolate. ChocoMix purchases ingredients from Wisconsin for its dark

chocolate division and from Louisiana for its milk chocolate division. Both locations

are the same distance from ChocoMix's Palo Alto plant. ChocoMix Inc. operates a

fleet of trucks as a cost center that charges the divisions for variable costs $($drivers

and fuel$)$ and fixed costs $($vehicle depreciation, insurance, and registration fees$)$ of

operating the fleet. Each division is evaluated on the basis of its operating income.

Data table

Requirements

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.

Describe the advantages and disadvantages of using each of the three methods in

requirement $1.$ Would you encourage ChocoMix Inc. to use one of these methods?

Explain and indicate any assumptions you made.