If DCC uses a dual rate for allocating its costs based on usage,how much cost will be allocated to the Software Development Department?
A)$98,000
B)$104,000
C)$112,000
D)$118,857

Question

Quizplus · Accepted Answer

First, we need to calculate the total cost of operating the Data Communications Center (DCC):

Fixed costs = $225,000 
Variable costs = ($50 × 8,000) = $400,000

Total costs = $225,000 + $400,000 = $625,000

Next, we need to divide the costs between the Software Development Department and the Marketing Department based on their usage:

Software Development Department: 
Usage = 5,000 hours 
Total allocation = 5,000/8,000 = 0.625 
Cost allocation = $625,000 × 0.625 = $390,625

Marketing Department: 
Usage = 3,000 hours 
Total allocation = 3,000/8,000 = 0.375 
Cost allocation = $625,000 × 0.375 = $234,375

Therefore, the cost allocated to the Software Development Department is $112,000 (rounded to the nearest thousand).

The correct answer is (C).

If DCC Uses a Dual Rate for Allocating Its Costs