Question
Proformer Inc. has two departments: Department A and Department B. Each department has considered renting a luxury car to use to travel around the US
Proformer Inc. has two departments: Department A and Department B. Each department has considered renting a luxury car to use to travel around the US and increase its business. If Department A rents the luxury car itself, it will use 1500 hours for the year. Department B plans to use the luxury car for 2500 hours for the year.
Renting the luxury car for the entire year will cost Proformer $14,000,000. If each department rents the luxury car by itself, the hourly rate is $5000/hour.
If Proformer uses the Incremental Cost Method and Department B is the primary user, how much of the cost is allocated to Department A?
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