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:

- If Stetchmore uses budgeted contribution margin as the allocation cost base, how much accounting costs would be allocated to the Rubber Band Division?

A) $6,000
B) $4,000
C) $2,400
D) $1,500