Ernst & Gray, CPAs Has Three Divisions: Audit, Tax, and Business

Multiple Choice

Ernst & Gray, CPAs has three divisions: audit, tax, and business consulting.When the specifications for the new computer system were established, the audit division needed 50% of the capacity, the tax division required 30%, and business consulting required 20%.The fixed computer department costs are allocated based on computer needs.The variable costs of the computer department are allocated based on the minutes of computer time that each department uses.The computer division budget for fixed costs is $450,000, and the budget for variable costs is $145,600.The company anticipates using 520,000 minutes of computer time.What amount of variable costs will be allocated when a division uses a minute of computer time?

A) $4.50
B) $2.80
C) $1.15
D) $0.28