The Alex Miller Corporation operates one central plant that has two divisions, the Flashlight Division and the Lamp Division. The following data apply to the coming budget year:

Budgeted costs of the operating the plant

for 10,000 to 20,000 hours:

Fixed operating costs per year $240,000

Variable operating costs $10 per hour

Practical capacity 20,000 hours per year

Budgeted long-run usage per year:

Lamp Division 800 hours 12 months = 9,600 hours per year

Flashlight Division 450 hours 12 months = 5,400 hours per year

Assume that practical capacity is used to calculate the allocation rates. Further assume that actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400 hours for the month of June.

Required:

1.If a single-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month? (base the rates on practical capacity)

2. For the month of June, if a single-rate cost allocation method is used based on practical capacity, what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume actual usage is used to allocate operating costs.

3. If a dual-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month? (Based on practical capacity) 4. If a dual-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month? (Based on practical capacity)

5. Give 2 reasons why a dual rate system using budgeted usage of fixed costs and actual usage of variable costs is better than a single rate system? Your discussion should focus on the Alex Miller analysis you just completed in parts 1-4