The IT department's cost data is as follows:
Estimated Costs
Fixed Costs $ 500,000
Variable, ($300 per hour) $600,000
Total $1,100,000
IT Departmental Usage:
Hours Department A Department B
Budgeted 1,100 900
Actual 1,300 1,200
The fixed costs are allocated based on relative budgeted hours with variable costs applied based on actual hours. Department A will be allocated total overhead of:
A. $715,000
B. $390,000
C. $605,000
D. $665,000
If it is helpful, please rate the answer and if any doubt arises let me know
Correct option is: D. $6,65,000 | ||||
Workings: | ||||
Hours | Department A | Department B | Total | |
Budgeted | 1,100 | 900 | 2,000 | |
Actual | 1,300 | 1,200 | 2,500 | |
Variable cost per hour | = | $ 300 | ||
Fixed cost per hour | = | $500000 / 2000 hours | ||
= | $ 250 | |||
Overhead Cost | Department A | Department B | ||
(Actual hours X $300) | Variable cost | $ 3,90,000 | $ 3,60,000 | |
(Budgeted hours X $250) | Fixed Cost | $ 2,75,000 | $ 2,25,000 | |
Total | $ 6,65,000 | $ 5,85,000 |
The IT department's cost data is as follows: Estimated Costs Fixed Costs $ 500,000 Variable, ($300...
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