Deck 14: Period Cost Allocation

Question 1

Which of the following is TRUE concerning cost allocation in a multi-product company?

A) Where the indirect costs are variable and each product is assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
B) Where the indirect costs are fixed and each product is assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
C) Where the indirect costs are variable and each product is not assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
D) Where the indirect costs are fixed and each product is not assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
E) Where the indirect costs are fixed and the products are produced jointly, it is possible to identify specific cause-and-effect relationships between work on an individual product and total costs incurred.

Answer 1

Where the indirect costs are variable and each product is assembled sequentially, the causality criterion can guide the choice of a cost allocation base.

Question 2

Scarborough Sales, a real estate company specializing in apartment rentals and home sales, is having difficulty in gathering appropriate cost information for evaluating its operations. It owns several large apartment complexes and sells homes owned by builders or existing homeowners. As the company's new accountant you define cost by major activity. You use this information for allocating costs to cost objects. Also, cost pools are created for appropriate cost allocations. The owner of the company is interested in exactly what you have done, and why it appears to be working so smoothly.
Required:
Briefly state the four purposes for allocating costs to cost objects and give two examples of how each can be used for the real estate company.

Answer 2

The four purposes are:
1. To provide information for economic decisions.
2. To motivate managers and employees.
3. To justify costs or compute reimbursements.
4. To measure income and assets for reporting to external parties.
Examples are:
1. a. Population growth in market area.
b. To determine if the company needs to go into the commercial market.
2. a. Provide sales incentives through commission rates and sales volume goals.
b. Reward employees for selling high margin properties.
3. a. Limit employee expenses on home sales to some percentage of selling price.
b. Provide sufficient customer services to attract new clients.
4. a. Use of proper amortization methods for apartment buildings.
b. Properly accrue commissions at end of each accounting period.

Question 3

AAA Fence Company manufactures wireless and aluminium fences in a common manufacturing facility. The company has become aware of unusual discrepancies in the costs of its products which management cannot explain. It seems that the sales and related production of wireless fences are in a very consistent growth market and are easily predicted. However, the sales and related production of aluminium fences are very erratic. Management does not understand why the costs per unit of wireless fences change when the production level seldom changes.
Required:
a. After some investigation you determine that for the last two quarters, the common fixed cost of the manufacturing operation has been $800,000. For the first quarter 12,000 wireless and 13,000 aluminium units were produced, respectively. For the second quarter, 12,000 wireless and 8,000 aluminium units were produced, respectively. What were the total cost per product and the cost per unit of each product in each quarter when production units is the allocation basis?
b. After studying the results of the above computations you decide to use the company's average quarterly production of 12,000 wireless and 10,500 aluminium units as the allocation base, respectively. What are the total cost per product and the cost per unit per quarter for each product when average production is used?
c. Which allocation base do you recommend, and why?

Answer 3

a.
First quarter:
Wireless Fence:
Allocated costs: $800,000 × 12,000/25,000 = $384,000
Cost per unit: $384,000/12,000 = $32.00
Aluminium Fence:
Allocated costs: $800,000 × 13,000/25,000 = $416,000
Cost per unit: $416,000/13,000 = $32.00
Second quarter:
Wireless Fence:
Allocated costs: $800,000 × 12,000/20,000 = $480,000
Cost per unit: $480,000/12,000 = $40.00
Aluminium Fence:
Allocated costs: $800,000 × 8,000/20,000 = $320,000
Cost per unit: $320,000/8,000 = $40.00
b.
Average method, all quarters:
Wireless Fence:
Allocated costs: $800,000 × 12,000/22,500 = $426,667
Cost per unit: $426,667/12,000 = $35.56
Aluminium Fence:
Allocated costs: $800,000 × 10,500/22,500 = $373,333
Cost per unit: $373,333/10,500 = $35.56
c.
Approach in part b is better because it eliminates the short-run fluctuations of fences and provides management with a consistent cost pattern.

Question 4

The fixed costs of operating the maintenance facility of General Hospital are $4,500,000 annually. Variable costs are incurred at the rate of $30 per maintenance-hour. The facility averages 40,000 maintenance-hours a year. Budgeted and actual hours per user for the year are as follows:
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Assume that budgeted maintenance-hours are used to calculate the allocation rates.
Required:
a. If a single-rate cost allocation method is used, what amount of maintenance cost will be budgeted for each department?
b. If a single-rate cost allocation method is used, what amount of maintenance cost will be allocated to each department based on actual usage?
c. If a dual-rate cost allocation method is used, what amount of maintenance cost will be budgeted for each department?
d. If a dual-rate cost allocation method is used, what amount of maintenance cost will be allocated to each department based on budgeted usage for fixed operating costs and actual usage for variable operating costs?

Question 5

The Alex Miller Corporation operates one central plant that has two divisions, the Flashlight Division and the Lamp Division. The following data apply to the coming budget year:

Assume that practical capacity is used to calculate the allocation rates. Further assume that actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400 hours for the month of June.
Required:
a. If a single-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month?
b. For the month of June, if a single-rate cost allocation method is used, what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume actual usage is used to allocate operating costs.
c. If a dual-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month?
d. For the month of June, if a dual-rate cost allocation method is used, what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

Question 6

The Eco-Garden Corporation operates one central plant that has two divisions, the Lawnmower Division and the Weedwacker Division. The following data apply to the coming budget year:

Assume that practical capacity is used to calculate the allocation rates. Further assume that actual usage of the Lawnmower Division was 350 hours and the Weedwacker Division was 200 hours for the month of June.
Required:
a. If a single-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lawnmower Division each month? For the Weedwacker Division each month?
b. For the month of June, if a single-rate cost allocation method is used, what amount of cost will be allocated to the Lawnmower Division? To the Weedwacker Division? Assume actual usage is used to allocate operating costs.
c. If a dual-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lawnmower Division each month? For the Weedwacker Division each month?
d. For the month of June, if a dual-rate cost allocation method is used, what amount of cost will be allocated to the Lawnmower Division? To the Weedwacker Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

Question 7

For each of the following cost pools select an appropriate allocation base from the list below if the overall cost object is to assign costs to production departments. Each base can be used only once. Assume a manufacturing company.

-Vice-president of finance's office expenses.

A) Number of employees per department.
B) Machine hours by department.
C) Hours of operation by production department.
D) Operations costs of each department.
E) Indirect labour hours per department.
F) Hours of computer use per month per department.

Question 8

For each of the following cost pools select an appropriate allocation base from the list below if the overall cost object is to assign costs to production departments. Each base can be used only once. Assume a manufacturing company.

-Computer operations used in conjunction with manufacturing.

A) Number of employees per department.
B) Machine hours by department.
C) Hours of operation by production department.
D) Operations costs of each department.
E) Indirect labour hours per department.
F) Hours of computer use per month per department.

Question 9

For each of the following cost pools select an appropriate allocation base from the list below if the overall cost object is to assign costs to production departments. Each base can be used only once. Assume a manufacturing company.

-Personnel department.

A) Number of employees per department.
B) Machine hours by department.
C) Hours of operation by production department.
D) Operations costs of each department.
E) Indirect labour hours per department.
F) Hours of computer use per month per department.

Question 10

For each of the following cost pools select an appropriate allocation base from the list below if the overall cost object is to assign costs to production departments. Each base can be used only once. Assume a manufacturing company.

-Manufacturing machinery cost.

A) Number of employees per department.
B) Machine hours by department.
C) Hours of operation by production department.
D) Operations costs of each department.
E) Indirect labour hours per department.
F) Hours of computer use per month per department.

Question 11

For each of the following cost pools select an appropriate allocation base from the list below if the overall cost object is to assign costs to production departments. Each base can be used only once. Assume a manufacturing company.

-Energy costs.

A) Number of employees per department.
B) Machine hours by department.
C) Hours of operation by production department.
D) Operations costs of each department.
E) Indirect labour hours per department.
F) Hours of computer use per month per department.

Question 12

Use the information below to answer the following question(s).
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.
For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used.

-The fixed and variable costs allocated to the Barbell Department are

A) $50,000 and $75,000, respectively.
B) $50,000 and $60,000, respectively.
C) $30,000 and $75,000, respectively.
D) $30,000 and $60,000, respectively.
E) $30,000 and $50,000 respectively.

Question 13

Use the information below to answer the following question(s).
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.
For both departments, common fixed costs are to be allocated on the basis of capacity available 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) $50,000 and $75,000, respectively.
B) $50,000 and $60,000, respectively.
C) $30,000 and $75,000, respectively.
D) $30,000 and $50,000, respectively.
E) $30,000 and $60,000 respectively.

Question 14

Correl Company's power plant provides electricity for its two operating departments, A and B. The year 2015 budget for the power plant shows:
‪

Required:
a. Compute the power plant costs allocated to A and B using the single-rate method with budgeted usage as the allocation base.
b. Compute the power plant costs allocated to A and B using the dual-rate method with actual usage as the allocation base for variable costs and budgeted usage as the allocation base for fixed costs.
c. From the standpoint of Departments A and B, what are the two main benefits of the dual-rate method?

Question 15

Barrel Company's power plant provides electricity for its two operating departments, A and B. The year 2015 budget for the power plant shows:

Actual power plant costs: fixed $132,000, variable $41,400
Budgeted rates are used in the allocation of electricity cost.
Required:
a. Compute the power plant costs allocated to A and B using the single-rate method with budgeted usage as the allocation base.
b. Compute the power plant costs allocated to A and B using the dual-rate method with actual usage as the allocation base for variable costs and budgeted usage as the allocation base for fixed costs.
c. From the standpoint of Departments A and B, what are the two main benefits of the dual-rate method?
d. Calculate the variable overhead efficiency variances for each department. Who would be the appropriate person(s) to provide information on the causes of these variances?

Question 16

The cost of operating the quality control department of Ames Manufacturing includes $608,000 of fixed costs and $400,000 of variable costs. The department normally budgets 21,000 inspection hours a year. Two departments receive quality control checks, fabrication and assembly. Fabrication is budgeted at 12,000 hours a year, while assembly is budgeted the remainder.
Required:
a. In July, fabrication used 1,000 inspection hours and assembly used 800 hours. How much did each department receive in quality control costs assuming a single-rate is used based on budgeted hours?
b. In August, fabrication used 1,200 inspection hours and assembly used 900 hours. How much did each department receive in quality control costs assuming a dual-rate is used with budgeted usage for fixed costs and actual usage for variable costs?
c. Which method seems more appropriate in this case? Explain.

Question 17

Marvelous Motors is a small motor supply outlet that sells motors to companies that make various small motorized appliances. The fixed operating costs of the company are $300,000 per year. The controlling shareholder, interested in product profitability and pricing, wants all costs allocated to the motors and wants to review the company status on a quarterly basis. The shareholder is trying to determine whether the costs should be allocated each quarter based on the 25% of the annual fixed operating costs ($75,000) or by using an annual forecast budget to allocate the costs. The following information is provided for the operations of the company:

Required:
a. What amount of fixed operating costs are assigned to each motor by quarter when actual sales are used as the allocation base and $75,000 is allocated?
b. How much fixed cost is recovered each quarter under requirement a.?
c. What amount of fixed operating costs are assigned to each motor by quarter when forecast sales are used as the allocation base and the rate is calculated annually as part of the budgetary process?
d. How much fixed cost is recovered each quarter under requirement c.?
e. Which method seems more appropriate in this case? Explain.

Question 18

Blaster Drive-In is a fast-food restaurant that sells burgers and hot dogs in a 1950s environment. The fixed operating costs of the company are $5,000 per month. The controlling shareholder, interested in product profitability and pricing, wants all costs allocated to either the burgers or the hot dogs. The following information is provided for the operations of the company:

Required:
a. What amount of fixed operating costs is assigned to the burgers and hot dogs when actual sales are used as the allocation base for January? For February?
b. Hot dog sales for January and February remained constant. Did the amount of fixed operating costs allocated to hot dogs also remain constant for January and February? Explain why or why not. Comment on any other observations.

Question 19

Van Meter Company has substantial fluctuations in its production costs because of the seasonality of figs. Most fig growers have two crops a year, one in June and one in August. However, the company has been importing figs from southern hemisphere countries, which extends the supply to the months of December and February.
Required:
What would you recommend as the monthly allocation base for the service departments of Van Meter Company? State your assumed cost object. A conceptual answer is required, not an example, such as cartons of figs.

Question 20

Brandy has been manager of the downtown branch of General Bank for several years. During this time she has received very good annual evaluations for her management of the branch. However, during the current year (it is now July) she has been upset with the monthly performance report generated by the budgeting department at the home office. Her branch has been making steady progress with controlled growth during the year and she knows of no reason why the report has such widely fluctuating variances. One item that she suspects is causing some of the problem is that most of the costs of the bank are fixed, with each branch getting an allocation of home office expenses each month. The bank also has some branches which are fast growing and some of which are having operating difficulties.
Required:From the information presented, what do you suggest as a possible cause of the reporting problems?

Question 21

Use the information below to answer the following question(s).
Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively.
Data on standard service hours and number of employees are as follows:


-How much of the cost of the Maintenance Department is allocated to Department B using the direct method?

A) $16,000
B) $12,800
C) $32,000
D) $24,000
E) $60,000

Question 22

Use the information below to answer the following question(s).
Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively.
Data on standard service hours and number of employees are as follows:


-How much of the cost of the Personnel Department is allocated to Department B using the direct method?

A) $8,000
B) $15,000
C) $5,000
D) $12,632
E) $60,000

Question 23

Use the information below to answer the following question(s).
Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively.
Data on standard service hours and number of employees are as follows:


-How much of the cost of the Personnel Department is allocated to Department A using the direct method?

A) $5,000
B) $15,000
C) $4,211
D) $12,632
E) $40,000

Question 24

Use the information below to answer the following question(s).
Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively.
Data on standard service hours and number of employees are as follows:


-What is the cost allocated from the Maintenance Department to Department A using the step-down method if the Personnel Department is allocated first?

A) $48,000
B) $48,706
C) $5,000
D) $12,000
E) $14,118

Question 25

Use the information below to answer the following question(s).
Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively.
Data on standard service hours and number of employees are as follows:


-What is the complete reciprocated cost of the Data Processing and the Plant Maintenance, respectively?

A) $90,000 and $393,750
B) $118,750 and $365,000
C) $122,971 and $375,773
D) $152,432 and $375,773
E) $152,432 and $369,459

Question 26

Use the information below to answer the following question(s).
Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively.
Data on standard service hours and number of employees are as follows:


-What is the Machining Department's allocation of both service departments respectively if their complete reciprocated cost were $375,000 for Plant Maintenance and $100,000 for Data Processing?

A) $112,275 and $74,468
B) $131,250 and $84,375
C) $281,250 and $12,500
D) $337,500 and $200,000
E) $337,500 and $12,500

Question 27

Broadway Department Store allocates the Personnel and Payroll Department's costs to the sales departments of Shoes, Automotive, and Clothing. Personnel and Payroll also provide services to each other. Personnel costs are allocated by number of employees, and payroll costs are allocated by gross payroll dollars. Costs and other information for January were as follows:


Required:
Prepare a schedule, which includes the total cost of operating the sales departments for January. Allocate service costs using the step-down method with the sequence of allocation based on highest percentage support concept.

Question 28

Gotham University offers only high-tech graduate-level programs. Gotham has two principal operating departments, Engineering and Computer Sciences, and two support departments, Facility and Technology Maintenance and Enrollment Services. The base used to allocate facility and technology maintenance is budgeted total maintenance hours. The base used to allocate enrollment services is number of credit hours for a department. The Facility and Technology Maintenance budget is $350,000, while the Enrollment Services budget is $950,000. The following chart summarizes budgeted amounts and allocation-base amounts used by each department:

Required:
Use the direct method to allocate support costs to each of the two principal operating departments, Engineering and Computer Sciences. Prepare a schedule showing the support costs allocated to each department.

Question 29

Gotham University offers only high-tech graduate-level programs. Gotham has two principal operating departments, Engineering and Computer Sciences, and two support departments, Facility and Technology Maintenance and Enrollment Services. The base used to allocate facility and technology maintenance is budgeted total maintenance hours. The base used to allocate enrollment services is number of credit hours for a department. The Facility and Technology Maintenance budget is $350,000, while the Enrollment Services budget is $950,000. The following chart summarizes budgeted amounts and allocation-base amounts used by each department:

Required:
Prepare a schedule which allocates service department costs using the step-down method with the sequence of allocation based on the highest-percentage support concept. Compute the total amount of support costs allocated to each of the two principal operating departments, Engineering and Computer Sciences.

Question 30

Landmark Systems Inc. designs and manufactures global positioning navigation systems for all-terrain vehicles and water craft. It has two support departments: Design and Engineering; and, two production departments, Vehicle Systems and Water Craft Systems.
The budgeted level of service relationships at the start of the year was:

Landmark Systems Inc. collects fixed costs and variable costs of each support department in separate pools. The budgeted costs for the year were:

Support department pools are combined by cost behavior for allocation purposes.
Production statistics (actual) are as follows:
Required:
a. Allocate the support department fixed costs using the dual-rate method. The company policy is to use design and engineering hours as the allocation base for variable costs; and, units produced for fixed costs. (round to the nearest cent)
b. Allocate the support department fixed costs using the reciprocal method.
c. Which method is preferable? Justify your answer.

Question 31

Landmark Systems Inc. designs and manufactures global positioning navigation systems for all-terrain vehicles and water craft. It has two support departments: Design and Engineering; and, two production departments, Vehicle Systems and Water Craft Systems.
The budgeted level of service relationships at the start of the year was:

Landmark Systems Inc. collects fixed costs and variable costs of each support department in separate pools. The budgeted costs for the year were:

Support department pools are combined by cost behavior for allocation purposes.
Production statistics (actual) are as follows:
Required:
a. Allocate the support department variable costs using the dual-rate method. The company policy is to use design and engineering hours as the allocation base for variable costs; and, units produced for fixed costs. (round to the nearest cent)
b. Allocate the support department variable costs using the reciprocal method.
c. Comment on the effect from combining the variable cost pools as opposed to considering them separately when applying the allocation methods.

Question 32

The manager of the Finishing Department is concerned about how the costs of service departments are being assigned to the Mixing Department. He knows that his department uses support activities entirely different from the other production departments. As a matter of fact, when something goes wrong in the Mixing Department the entire plant has to stop production because of the critical nature of the chemical processing in that department. Several support departments, such as maintenance and clean-up stop whatever they are doing and come to help the Mixing Department. However, it appears that the Mixing Department is not assigned any additional support costs because all support costs are assigned on the basis of actual outputs.
Required:
Explain the methods available for the allocation of costs from one department to another. Which method would you recommend for this company and why?

Question 33

Cutler Hammer currently utilizes a manufacturing facility for $200,000 per year. The facility is used at 70 percent capacity. The shipping department has proposed a plan in which it would utilize the other 30 percent plant capacity for the company's shipping plus handling the shipping of several nearby businesses. The company's consulting firm estimated that the overall costs of maintaining the space would increase by 12 percent.
The shipping manager is interested in the amount that would be allocated under the incremental method.

A) $70,000
B) $60,000
C) $84,000
D) $67,200
E) $24,000

Question 34

Smith Company and Jones Company currently share an employee dining facility. Jones Company employs fewer people and believes that they should not be required to pay one-half of the $300,000 costs incurred for the facility. An independent consulting firm stipulated that Smith Company could receive the same services for $150,000 while Jones's employees could receive comparable services for $100,000.
What will be Jones's allocated cost if the stand-alone method is used?

A) $83,333
B) $100,000
C) $120,000
D) $150,000
E) $180,000

Question 35

Hunt Company and Indio Company are noncompeting lines of business and use a common database for marketing purposes. The variable costs associated with accessing the database are readily identifiable and kept in separate cost pools that are charged to each user. The fixed costs of maintaining the database, however, cannot be identified by user on a cause-and-effect basis. These fixed costs for the next year are budgeted at $55,000. If Hunt does not use the database, the fixed costs to Indio are $48,000. An outside vendor offers to provide Hunt access to a comparable database for a fixed fee fo $60,000 per year plus variable costs of accessing the database. The same vendor offers to provide Indio access to that database for a fixed fee of $20,000 per year plus variable costs of accessing the database.
Required:
Compute how much of the $55,000 fixed costs of maintaining the database are charged to by each user:
a. Under the stand-alone allocation method.
b. Under the incremental allocation method, assuming Hunt Company is regarded as the primary
user.

Question 36

The Maintenance Department has been servicing Gizmo Production for four years. Beginning next year, the company is adding a Scrap-Processing Department to recycle the materials from Gizmo Production. As a result, maintenance costs are expected to increase from $480,000 per year to $500,000 per year. The Scrap-Processing Department will use 25% of the maintenance efforts.
Required:
a. Using the stand-alone cost-allocation method, identify the amount of maintenance cost that will be allocated to Gizmo Production and the Scrap-Processing Department next year.
b. Using the incremental cost-allocation method, identify the amount of maintenance cost that will be allocated to Gizmo Production and the Scrap-Processing Department next year.

Question 37

Answer the following questions using the information below:
The Salmon Bay Corporation currently uses a manufacturing facility costing $200,000 per year; 80% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 20% of the facility and increase the overall costs of maintaining the space by 5%.

-John Ebert, a graduating student at a university in Calgary, received an invitation to visit a prospective employer in Halifax. A few days later, he received an invitation from a prospective employer in Toronto. He decided to combine his visits, travelling from Calgary to Halifax, Halifax to Toronto, and Toronto to Calgary.
Ebert received job offers from both companies. On his return, he decided to accept the offer in Toronto. He was puzzled as to how to allocate his travel costs between the two employers. He gathered the following data:
?
Ebert paid $1,900 for his three-leg flight (Calgary to Halifax, Halifax to Toronto, Toronto to Calgary). In addition, he paid $30 for a limousine from his home to Calgary Airport and another $30 for a limousine from Calgary Airport to his home when he returned.
Required:
a. Allocate the $1,900 airfare between the employers in Halifax and Toronto using both the stand-alone and incremental methods?
b. How would you allocate the $60 limousine fare?

Question 38

The Product Data Center has been servicing the Struble Production Casting Department for five years. Beginning next year, the company is adding a Production Molding Department to compliment the materials produced by the Struble Production Casting Department. As a result, data center costs are expected to increase from $700,000 per year to $800,000 per year. The Production Molding Department will use 20% of the data center efforts.
Required:
a. Using the stand-alone cost-allocation method, identify the amount of data center cost that will be allocated to Struble Production Casting and the Production Molding Department next year.
b. Using the incremental cost allocation method, identify the amount of data center cost that will be allocated to Struble Production Casting and the Production Molding Department next year.