Indulgence Inc. is a producer of premium chocolate based in Palo Alto. The company has a separate division for each of its two products: dark chocolate and milk chocolate. Indulgence purchases ingredients from Wisconsin for its dark chocolate division and from Louisiana for its milk chocolate division. Both locations are the same distance from Indulgence's Palo Alto plant. IndulgenceInc. 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. For 2013, the trucking fleet had a practical capacity of 70

round-trips between the Palo Alto plant and the two suppliers. It recorded the followinginformation:

	Budgeted	Actual
Costs of truck fleet	$164,500	$130,000
Number of round-trips for dark chocolate
division (Palo Alto plant - Wisconsin)	40	40
Number of round-trips for milk chocolate
division (Palo Alto plant - Louisiana)	30	25

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 onround-trips budgeted for each division.
b.	Calculate the budgeted rate per round-trip and allocate costs based on actualround-trips used by each division.
c.	Calculate the actual rate per round-trip and allocate costs based on actualround-trips used by each division.

2.

Describe the advantages and disadvantages of using each of the three methods in requirement 1. Would you encourage Indulgence Inc. to use one of these methods? Explain and indicate any assumptions you made.