Question

Barrington Box Enterprises has two divisions, large and small, that share the common costs of the company's communications network. The annual common costs are $4,200,000. You have been provided with the following information for the upcoming year:
  

	Calls	Time on Network (hours)
Large	118,000	120,000
Small	82,000	280,000

The cost accountant determined $2,780,000 of the communication network's costs were fixed and should be allocated based on the number of calls. The remaining costs should be allocated based on the time on the network. What is total communication network costs allocated to the Small Box Division, assuming the company uses dual-rates to allocate common costs?

Answer 1

ANSWER:

The overheads that has to be allocated on the basis of number of calls $ 2780000

The overheads that has to be allocated on the basis of time on network is $ 1420000

The overhead based on number of calls for small division

= ($2780000 ÷ (118000 +82000))*82000

= $1139800

The overheads based on time on network for small division

=($1420000÷(120000+280000))*280000

=$994000

Total overhead for small division is

=$1139800 + $994000

=$2133800

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