Use the information below to answer the following question(s).We Be Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable costs.Data are provided below for the capacity allowed and the capacity used. For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used.
-Assuming that fixed and variable costs are allocated according to capacity used then the fixed and variable costs allocated to the Barbell Department will be
A)$30,000 and $50,000, respectively.
B)$30,000 and $60,000, respectively.
C)$30,000 and $75,000 respectively.
D)$40,000 and $60,000, respectively.
E)$60,000 and $40,000, respectively.

Question

Use the information below to answer the following question(s).We Be Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable costs.Data are provided below for the capacity allowed and the capacity used.  For both departments, common fixed costs are to be allocated on the basis of capacity available and common variable costs are to be allocated on the basis of capacity used.
-Assuming that fixed and variable costs are allocated according to capacity used then the fixed and variable costs allocated to the Barbell Department will be
A)$30,000 and $50,000, respectively. 
B)$30,000 and $60,000, respectively. 
C)$30,000 and $75,000 respectively. 
D)$40,000 and $60,000, respectively. 
E)$60,000 and $40,000, respectively.

Quizplus · Accepted Answer

To allocate costs according to capacity used, we need to divide the total common fixed costs by the capacity available and allocate them to each department accordingly. 
$80,000 ÷ 10,000 (Barbell department capacity allowed) + 18,000 (Kettlebell department capacity allowed) = $5 per unit
For the Barbell department:
Fixed costs allocated = $5 × 6,000 (Barbell department capacity used) = $30,000
To allocate common variable costs according to capacity used, we need to multiply the variable cost per unit by the actual capacity used. 
Variable cost per unit: $120,000 ÷ 8,000 (total capacity used by both departments) = $15 per unit
For the Barbell department:
Variable costs allocated = $15 × 4,000 (Barbell department capacity used) = $60,000
Therefore, the fixed and variable costs allocated to the Barbell department are $40,000 and $60,000, respectively (choice D).

Use the Information Below to Answer the Following Question(s)