Ernst & Gray, CPAs has three divisions: audit, tax, and business consulting.When the specifications for the new computer system were established, the audit division needed 50% of the capacity, the tax division required 30%, and business consulting required 20%.The fixed computer department costs are allocated based on computer needs.The variable costs of the computer department are allocated based on the minutes of computer time that each department uses.The computer division budget for fixed costs is $450,000, and the budget for variable costs is $145,600.The company anticipates using 520,000 minutes of computer time.If the business consulting division uses 78,000 minutes of computer time, what is the total amount of computer department costs that will be allocated to the business consulting division (round your intermediate calculation to two decimal places)?
A)$21,840
B)$89,340
C)$111,840
D)$119,120

Question

Quizplus · Accepted Answer

The total amount of computer department costs that will be allocated to the business consulting division can be calculated as follows:

Fixed costs allocated to business consulting = $450,000 x 20% = $90,000
Variable costs allocated to business consulting = ($145,600/520,000) x 78,000 = $21,840

Total costs allocated to business consulting = $90,000 + $21,840 = $111,840. Therefore, the best choice is C.

Ernst & Gray, CPAs Has Three Divisions: Audit, Tax, and Business