- A firm has two departments (X and Y) that use a central computer network. The network is expected to incur $4,000 in fixed costs and $3 per hour in variable costs. X and Y estimated that they would use the network for 500 and 300 hours, respectively; their actual usages were 600 and 200 hours, respectively. The computer network actually cost $4,500 in fixed costs and $2.75 per hour in variable costs.
Under a single-rate approach, using budgeted rates and usages, what is the cost allocated to Department X?
- Under a dual-rate approach, using budgeted rates and usages, what is the cost allocated to Department X?
- Under a single-rate approach, using budgeted rates and usages, what is the cost allocated to Department X?
= [$4,000+$3(500+300)]/800 = $8/hr
= $8/hr x 600 hrs = $4,800
- Under a dual-rate approach, using budgeted rates and usages, what is the cost allocated to Department X?
Fixed: 4,000 x (500 / 800) = $2,500
Variable: $3 x 600 = 1,800
$4,300
