Question
The computer department (CD) of ABC Corporation is considered a service department, and allocations of the costs incurred by this department are made to the
The computer department (CD) of ABC Corporation is considered a service department, and allocations of the costs incurred by this department are made to the three divisions within ABC, (X, Y, and Z) benefiting from its use. These three divisions originally requested the idea of centrally provided computer services and estimated the extent of their long term need for computer support so that the needed capacity for this service could be identified. These estimates for long term use and the actual CPU time used during the current month, December, are shown below for each using division:
Division |
| % of Expected Long-Term Use of Capacity |
| Actual CPU Hours Used In December |
X Y Z Total |
| 30 % 60 % 10 % 100% |
| 1,500 7,500 1,000 10,000 |
CDs actual costs incurred for the month of December were $500,000; CDs budgeted monthly costs are determined using the following equation incorporating CPU Hours as the cost driver:
Budgeted Monthly CD Cost = $475,000 + $1.50 per CPU Hour
Use this information to answer the next four questions.
1. Determine the total December computer costs that should be allocated FROM CD to the using divisions using allocation Method 1 (actual costs w/ actual use):
Group of answer choices
$490,000
$475,000
$500,000
$515,000
2. Determine the total December computer costs that should be allocated FROM CD to the using divisions using allocation Method 2 (budgeted costs w/ actual use):
Group of answer choices
$515,000
$490,000
$500,000
$475,000
3. Indicate the $ amount of the total allocation that would be allocated TO Division Y only, using Method 2 (budgeted costs w/ actual use).
Group of answer choices
$300,000
$296,250
$294,000
$367,500
4. Indicate the $ amount of the total CD allocation that would be allocated TO Division Y only, using the Dual Rate Method.
Group of answer choices
$367,500
$300,000
$294,000
$296,250
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