Suppose a firm€™s secretarial pool incurs $40,000 in fixed costs plus $15 in variable costs for each hour of service. This amount of fixed costs allows the pool to accommodate an average volume of 5,000 hours of support per month. The following data pertain to usage patterns (in hours used) for the three departments that are the only users of the secretarial pool.

Actual secretarial costs for April, May, and June amounted to $110,000, $123,000, and $112,000, respectively.

Required:
a. Determine the cost allocated to each of the three departments if the firm used a single rate, based on actual costs and usage, to allocate secretarial costs to the user departments.
b. Repeat the allocation assuming that the firm uses a single rate to allocate costs but it employs costs to compute the rates.
c. Repeat the allocation assuming that the firm employs separate rates for allocating fixed and variable costs. Assume that long-run usage is the denominator volume for allocating fixed costs.
d. Which of these mechanisms would you recommend?Why?

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Average Planned Usage (hours) 2,000 2,000 1,000 5,000 Actual Usage (in hours) April MayJune 2,000 2,000 2,000 1,500 2,500 2,000 Department l Department 2 Department 3 700 700 800 Total 4,200 5,200 4,800