Roadways Enterprises Has Two Divisions, Production and Support, That Share

Essay

Roadways Enterprises has two divisions, Production and Support, that share the common costs of the company's communications network. The annual common costs are $4,500,000. You have been provided with the following information for the upcoming year:
$$\begin{array} { | l | c | c | } \hline & \text { Calls } & \text { Time on Network (hours) } \\\hline \text { Production } & 200,000 & 240,000 \\\hline \text { Support } & 160,000 & 660,000 \\\hline\end{array}$$
Required:
(Use three decimal places in your calculations.)
a. What is the allocation rate for the upcoming year assuming Roadways uses the single-rate method and allocates common costs based on the number of calls? Calculate the costs allocated to each division.
b. What is the allocation rate for the upcoming year assuming Roadways uses the single-rate method and allocates common costs based on the time on the network? Calculate the costs allocated to each division.
c. The cost accountant determined $2,700,000 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 the total communication network costs allocated to each division?