Copy of Riley's Land Management Company has $27,000 in indirect costs operating her company. She...
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Accounting
Copy of Riley's Land Management Company has $27,000 in indirect costs operating her company. She has identified three activities that drive these indirect cost and created three related cost pools as detailed below:
Activities
Costs
Cost-drivers
Labor Hours
$24,000
900 hours
Gas
$1,800
400 gallons
Invoices
$1,200
250 invoices
Total costs
$27,000
Riley has three divisions. Each division uses different amount of the cost driving activities as described below.
Department
Lawn
Bush
Plowing
Total
Labor hours (hours)
350
200
?
900
Gas (gallons)
130
?
60
400
Invoices (invoices)
?
50
50
250
If Riley allocates indirect costs to each division using the three cost pool above and three allocation rates how much cost will each division be assigned per gallon of gas used in that division? (In other words, what would be the allocation rate used to assign costs that are driven by the gallons of gas used?)
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