Stretchmore, Inc

Multiple Choice

Stretchmore, Inc. has two product divisions-Rubber Bands and Bungee Cords. The Rubber Band Division products budgets an average sales price of $4 and budgets variable costs of $2 per unit. The Bungee Cord Division budgets an average sales price of $50 and budgets variable costs of $12 per unit. Both divisions use the Accounting Department, which incurs monthly shared cost of $10,000. Data for the month of July follows:
Which is the best method to allocate shared accounting costs?

A) Number of reports
B) Operating income
C) Either A or B
D) Neither A nor B