Question

Question 3 (1 point)

Triton Company's copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity of copies:

Salaries (fixed)	$86,750
Employee benefits (fixed)	10,000
Depreciation of copy machines (fixed)	10,000
Utilities (fixed)	5,000
Paper (variable, 1 cent per copy)	50,000
Toner (variable, 1 cent per copy)	50,000

The costs are assigned to two cost pools, one for fixed and one for variable costs. The costs are then assigned to the sales department and the administrative department. Fixed costs are assigned on a lump-sum basis, 40 percent to sales and 60 percent to administration. The variable costs are assigned at a rate of 2 cents per copy.

Assuming the following copies were made during the year, 2,855,000 for sales and 2,786,500 for administration, calculate the copy department costs allocated to sales.

Round to two decimal places.

Your Answer:

Answer 1

Calculation of fixed cost and variable cost.

Fixed cost
Particulars	Amount
Salaries	86750
Employee benefits	10,000
Depreciation	10,000
Utilities	5000
Total	111750

Given fixed cost allocation is 40% to sales and 60% to administration

Hence, Allocation to Sales Department and Administrative department is as follows

Sales Department - 111750 * 0.4 = 44700

Administrative Department - 111750 * 0.6 = 67050

Allocation for variable cost-

Sales Department - 2,855,000 *2 = 5710000

Administration Department - 2786500 * 2 = 5573000

Note - Fixed costs will not change irrespective of the activity level (Example - Rents, Watch man salary etc)

Variable cost change with the change in the level of activity ( Example - Purchase of raw material, Selling expense etc)