In: Accounting
We Be Warehouse Fitness Equipment incurred $80,000 of common
fixed costs and $120,000 of common variable costs. Data are
provided below for the capacity allowed and the capacity
used.
Department | Capacity Provided in Hours |
Capacity Used in Hours |
Barbell Department | 500 | 400 |
Sauna Department | 300 | 400 |
For both departments, common fixed costs are to be allocated on the basis of capacity provided and common variable costs are to be allocated on the basis of capacity used.
The fixed and variable costs allocated to the Sauna Department are:
a) $30,000 and $60,000 respectively |
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b) $50,000 and $60,000, respectively. |
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c) $50,000 and $75,000, respectively. |
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d) $30,000 and $50,000, respectively. |
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e) $30,000 and $75,000, respectively. |
Correct answer is: a) $30000 and $60000, respectively | |||
Workings: | |||
Department | Common Fixed cost | Common Variable cost | |
Barbell | $ 50,000 | $ 60,000 | |
Sauna | $ 30,000 | $ 60,000 | |
Department | Capacity provided | Weight | Common Fixed cost |
(a) | (b) = (a)/800 | $80000 X (b) | |
Barbell | 500 | 62.50% | $ 50,000 |
Sauna | 300 | 37.50% | $ 30,000 |
Total | 800 | $ 80,000 | |
Department | Capacity used | Weight | Common Variable cost |
(a) | (b) = (a)/800 | $120000 X (b) | |
Barbell | 400 | 50% | $ 60,000 |
Sauna | 400 | 50% | $ 60,000 |
Total | 800 | $ 1,20,000 |