Q1. Alpha Roofing Ltd. and Beta Roofing Ltd. are each owned by the Thompson brothers, Ned and Ralph. Alpha does mostly residential buildings and Beta focuses on the commercial building market. Currently each lease a conveyor belt that moves roofing materials from the ground to the roof for $30 per hour. Alpha Roofing requires approximately 1,200 hours per year; and, Beta Roofing 600 hours per year. They are considering purchasing a conveyor belt that has an estimated hourly cost of $20 over its' useful life.

Required:

a. Using the stand-alone cost-allocation method, identify the amount of conveyor belt cost that will be allocated to each of the companies next year.

b. Using the incremental cost-allocation method, identify the amount of conveyor belt cost that will be allocated to each of the companies next year assuming that Apha is the primary party.