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The Corporation Victor operates one central plant that has one support department and two production...

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Accounting

  1. The Corporation Victor operates one central plant that has one support department and two production divisions: Division 1 and Division 2. The following data apply to the coming budget year:

    Budgeted costs of the support department

    Fixed operating costs $260,000

    Variable operating costs $100 per hour

    Practical capacity 2,000 hours

    Budgeted long-run usage:

    Division 1 800 hours per year

    Division 2 500 hours per year

    Assume that actual usage of the Division 1 was 700 hours and the Division 2 was 400 hours. Assume that annual budgeted long-run usage (Demand) is used to calculate the allocation rates for the Division 1 and Division 2 of Corporation Victor.

    Required:

    If a dual-rate cost-allocation method is used, what amount of cost will be allocated to the Division 1? To the Division 2?

    A.

    $120,864 and $101,799
    B.

    70,000 and $100,000
    C.

    $230,000 and $140,000

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