Tyler’s Consulting Company has purchased a new $15,000 copier. This overhead cost will be shared by...
Tyler’s Consulting Company has purchased a new $15,000 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those are the only departments which will be able to access the machine. The company has decided to allocate the cost based on the number of copies made by each department. The copier is estimated to provide 1 million copies over its life. Each division has estimated the number of copies which will be made over the life of the copier.
Purchasing 350,000
Accounting 200,000
Information Tech 425,000
Note: Cost allocations are computed to 4 significant digits. Resulting values are rounded to the whole dollar. If the purchasing department makes 72,000 copies this year what will be their allocated overhead?
A. $25,200
B. $70,200
C. $1,109
D. $2,160
Homework Answers
Total estimated copy = 350000+200000+425000 = 975000
Allocation rate = 15000/975000 = 0.0154
Allocated overhead for 72000 copies = 72000*0.0154 = 1109
So answer is c) $1109
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budgeted-volume levels before allocations as follows:
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are achieved by using individual department overhead rates. These
rates are developed after support-department costs are allocated to
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General plant administration
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