Mode Department Store has a new promotional program that offers a free gift-wrapping service for its customers. Mode's customer-service department has practical capacity to wrap 7,750 gifts at a budgeted fixed cost of $6,975 each month. The budgeted variable cost to gift wrap an item is $0.25. During the most recent month, the department budgeted to wrap 6,975 gifts. Although the service is free to customers, a gift-wrapping service cost allocation is made to the department where the item was purchased. The customer-service department reported the following for the most recent month: E: (Click the icon to view the actual and budgeted units.) Read the requirements. Requirement 1. Using the single-rate method, allocate gift-wrapping costs to different departments in these three ways. Start with allocating (a), then (b), and finally (C). (Round all of your answers to the nearest cent.) (a) (b) (c) Budgeted rate per item: Giftware Women's Apparel Fragrances Men's Apparel Domestics Total Requirement 2. Using the dual-rate method, compute the amount allocated to each department when (a) the fixed-cost rate is calculated using budgeted costs and the practical gift-wrapping capacity, (b) fixed costs are allocated based on budgeted usage of gift-wrapping services, and (c) variable costs are allocated using the budgeted variable-cost rate and actual usage. (Round all of your answers to the nearest cent.) Variable Fixed Total Rate per item: Giftware Women's Apparel Fragrances Men's Apparel Domestics Total Requirement 3. Comment on your results in requirements 1 and 2. Discuss the advantages of the dual-rate method. of each The dual-rate method allocated fixed costs and variable costs V. Fixed costs are allocated proportionately to the departments causing the incurrence of those costs based on the department. The costs allocated to a department affected by the usage of other departments. Mode Department Store has a new promotional program that offers a free gift-wrapping service for its customers. Mode's customer-service department has practical capacity to wrap 7,750 gifts at a budgeted fixed cost of $6,975 each month. The budgeted variable cost to gift wrap an item is $0.25. During the most recent month, the department budgeted to wrap 6,975 gifts. Although the service is free to customers, a gift-wrapping service cost allocation is made to the department where the item was purchased. The customer-service department reported the following for the most recent month: E: (Click the icon to view the actual and budgeted units.) Read the requirements. Requirement 1. Using the single-rate method, allocate gift-wrapping costs to different departments in these three ways. Start with allocating (a), then (b), and finally (C). (Round all of your answers to the nearest cent.) (a) (b) (c) Budgeted rate per item: Giftware Women's Apparel Fragrances Men's Apparel Domestics Total Requirement 2. Using the dual-rate method, compute the amount allocated to each department when (a) the fixed-cost rate is calculated using budgeted costs and the practical gift-wrapping capacity, (b) fixed costs are allocated based on budgeted usage of gift-wrapping services, and (c) variable costs are allocated using the budgeted variable-cost rate and actual usage. (Round all of your answers to the nearest cent.) Variable Fixed Total Rate per item: Giftware Women's Apparel Fragrances Men's Apparel Domestics Total Requirement 3. Comment on your results in requirements 1 and 2. Discuss the advantages of the dual-rate method. of each The dual-rate method allocated fixed costs and variable costs V. Fixed costs are allocated proportionately to the departments causing the incurrence of those costs based on the department. The costs allocated to a department affected by the usage of other departments
