Direct Method, Variable versus Fixed Costing and Performance Evaluation AirBorne is a small airline operating out of Boise, Idaho. Its three flights travel to Salt Lake City, Reno, and Portland. The owner of the airline wants to assess the full cost of operating each flight. As part of this assessment, the costs of two support departments (maintenance and baggage) must be allocated to the three flights. The two support departments that support all three flights are located in Boise (any maintenance or baggage costs at the destination airports are directly traceable to the individual flights). Budgeted and actual data for the year are as follows for the support departments and the three flights: Use the rounded values for subsequent calculations. Support Centers Flights Maintenance Baggage Salt Lake City Reno Portland Budgeted data: Fixed overhead $240,000 $150,000 $20,000 $18,000 $30,000 Variable overhead $30,000 $64,000 $5,000 $10,000 6,000 Hours of flight time" 2,000 4,000 2,000 Number of passengers 10,000 15,000 5,000 Actual data: Fixed overhead Variable overhead $235,000 $80,000 $156,000 $33,000 $22,000 $17,000 $29,500 $6,200 $11,000 $5,800 Hours of flight time 1,800 4,200 2,500 Number of passengers 8,000 16,000 6,000 *Normal activity levels. Round all allocation ratios and variable rates to four significant digits. Round all allocated amounts to the nearest dollar. Required: 1. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to determine the cost of operating each flight. Allocation ratios for fixed costs SLC Reno Portland Hours of flight time Number of passengers 2,000 X 10,000 X 4,000 X 15,000 X 2,500 X 6,000 X SLC Reno Portland Hours of flight time Number of passengers 2,000 X 10,000 X 4,000 X 2,500 X 15,000 X 6,000 X Variable rates: Maintenance: Baggage: Cost Allocation X per flight hour X per passenger SLC Reno Portland Maintenance-fixed: 22,000 X X $ Maintenance-variable: X x Baggage-fixed: Baggage-variable: x x x x 2. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to evaluate performance. SLC Reno Portland Maintenance-fixed: 22,000 X X $ Maintenance-variable: X x Baggage-fixed: Baggage-variable: x x