Question

The Georgia Corporation has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year:

Budgeted costs of operating the copying facility

for 300,000 to 500,000 copies:

        Fixed costs per year                                                             $69,000

        Variable costs                                                              3 cents (0.03)    per copy

Budgeted long-run usage in copies per year:

        Marketing Department                                                       100,000    copies

        Operations Department                                                      360,000    copies

Budgeted amounts are used to calculate the allocation rates.

Actual usage for the year by the Marketing Department was 70,000 copies and by the Operations Department was 330,000 copies. If a single-rate cost-allocation method is used, what amount of copying facility costs will be allocated to the Marketing Department? Assume actual usage is used to allocate copying costs. (Do not round interim calculations and round the final calculation to the nearest dollar.)

Question 3 options:

Answer 1

Overhead rate = $69000 / 460000 = $0.15 per copy
Single rate = $0.15 + 0.03 = $0.18 per copy

Overhead allocated to Marketing Department = 70000 x $0.18 = $12600