Barrington Box Enterprises has two divisions, large and small, that share the common costs of the company's communications network. The annual common costs are $4,500,000. You have been provided with the following information for the upcoming year:
$$\begin{array} { | l | r | c | }
\hline & { \text { Calls } } &{ \text { Time on Network (hours) } } \
\hline \text { Large } & 100,000 &120,000 \
\hline \text { Small } & 80,000 & 320,000 \
\hline
\end{array}$$

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The cost accountant determined $2,700,000 of the communication network's costs were fixed and should be allocated based on the number of calls. The remaining costs should be allocated based on the time on the network. What is the total communication network costs allocated to the Large Box Division, assuming the company uses dual-rates to allocate common costs?
A) $2,700,000.
B) $2,520,000.
C) $1,980,000.
D) $1,500,000.

Question

Barrington Box Enterprises has two divisions, large and small, that share the common costs of the company's communications network. The annual common costs are $4,500,000. You have been provided with the following information for the upcoming year:
$$\begin{array} { | l | r | c | } 
\hline &  { \text { Calls } } &{ \text { Time on Network (hours) } } \
\hline \text { Large } & 100,000 &120,000 \
\hline \text { Small } & 80,000 & 320,000 \
\hline
\end{array}$$

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The cost accountant determined $2,700,000 of the communication network's costs were fixed and should be allocated based on the number of calls. The remaining costs should be allocated based on the time on the network. What is the total communication network costs allocated to the Large Box Division, assuming the company uses dual-rates to allocate common costs?
A) $2,700,000.
B) $2,520,000.
C) $1,980,000.
D) $1,500,000.

Quizplus · Accepted Answer

The fixed costs of $2,700,000 are allocated based on the number of calls. Large division makes 100,000 out of 180,000 total calls, so it gets $1,500,000 (100,000/180,000 * $2,700,000). The remaining $1,800,000 is variable and allocated based on time on the network. Large division uses 120,000 out of 440,000 total hours, so it gets $480,000 (120,000/440,000 * $1,800,000). Total cost for Large division is $1,980,000 ($1,500,000 + $480,000).

Barrington Box Enterprises Has Two Divisions, Large and Small, That