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 $4,250,000. You have been provided with the following information for the upcoming year:
  

	Calls	Time on Network (hours)
Large	111,000	168,400
Small	74,000	252,600

The cost accountant determined $3,070,000 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?

$1,180,000.

$1,074,119.

$861,881.

$1,936,000.

Answer 1

The overheads that has to be allocated on the basis of number of calls $ 3070000

The overheads that has to be allocated on the basis of time on network is $ 1180000

The overhead based on number of calls for small division

= ($3070000 ÷ (111000 +74000))*74000

= $1228000

The overheads based on time on network for small division

=($1180000÷(168400+252600))*252600

=$708000

Total overhead for small division is

=$1228000 + $708000

=$1936000

So the correct answer is $1936000