Question

Miracle Consulting Corporation has its headquarters in Chicago and operates from three branch offices in Portland, Dallas, and Miami. Two of the company's activity cost pools are General Service and Research Service. These costs are allocated to the three branch offices using an activity-based costing system. Information for next year follows:

Activity Cost Pool	Activity Measure	Estimated Cost
General service	% of time devoted to branch	$	870,000
Research service	Computer time	$	261,040

Estimated branch data for next year is as follows:

	% of time		Computer time
Portland	30	%	234,000	minutes
Dallas	60	%	184,000	minutes
Miami	10	%	84,000	minutes

How much of the headquarters cost allocation should the Dallas office expect to receive next year?

Answer 1

Answer

• Allocation to Dallas
  = ($870000 x 60%) + ($261040 x 184000 minutes/502000 minutes)
  = 522000 + 95680
  = $ 617,680 Answer