Mesa Telcom has three divisions, commercial, retail, and consumer, that share the common costs of the company's computer server network. The annual common costs are $2,400,000. You have been provided with the following information for the upcoming year:
$$\begin{array} { | l | r | r | }
\hline & \text { Connections } & { \text { Time on Network (hours) } } \
\hline \text { Commercial } & 60,000 & 120,000 \
\hline \text { Retail } & 80,000 & 150,000 \
\hline \text { Consumer } & 100,000 & 330,000 \
\hline
\end{array}$$
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The cost accountant determined $1,700,000 of the server network's costs were fixed and should be allocated based on the number of connections. The remaining costs should be allocated based on the time on the network. What is total server network costs allocated to the Retail Division (rounded to the nearest whole dollar), assuming the company uses dual-rates to allocate common costs?
A) $741,667.
B) $657,143.
C) $425,000.
D) $211,765.

Question

Mesa Telcom has three divisions, commercial, retail, and consumer, that share the common costs of the company's computer server network. The annual common costs are $2,400,000. You have been provided with the following information for the upcoming year:
$$\begin{array} { | l | r | r | } 
\hline & \text { Connections } &  { \text { Time on Network (hours) } } \
\hline \text { Commercial } & 60,000 & 120,000 \
\hline \text { Retail } & 80,000 & 150,000 \
\hline \text { Consumer } & 100,000 & 330,000 \
\hline
\end{array}$$
-
The cost accountant determined $1,700,000 of the server network's costs were fixed and should be allocated based on the number of connections. The remaining costs should be allocated based on the time on the network. What is total server network costs allocated to the Retail Division (rounded to the nearest whole dollar), assuming the company uses dual-rates to allocate common costs?
A) $741,667.
B) $657,143.
C) $425,000.
D) $211,765.

Quizplus · Accepted Answer

The correct answer is A. The total server network costs allocated to the Retail Division are $741,667. This is calculated by first allocating the fixed costs based on the number of connections. The Retail Division has 80,000 connections, which is 40% of the total number of connections. Therefore, the Retail Division is allocated 40% of the fixed costs, which is $680,000. Next, the variable costs are allocated based on the time on the network. The Retail Division has 150,000 hours on the network, which is 30% of the total number of hours on the network. Therefore, the Retail Division is allocated 30% of the variable costs, which is $61,667. The total server network costs allocated to the Retail Division are $680,000 + $61,667 = $741,667.

Mesa Telcom Has Three Divisions, Commercial, Retail, and Consumer, That