Answer the following question(s)using the information below:
The Fancy Flier Airplane Corporation has a central materials laboratory.The laboratory has only two users, the Large Plane Department and the Small Plane Department.The following data apply to the coming budget year:
Budgeted amounts are used to calculate the allocation rates.Actual usage for the year by the Large Plane Department was 6,000 technician hours and by the Small Plane Department was 6,500 technician hours.
-If a dual-rate cost allocation method is used, what amount of materials laboratory costs will be budgeted for the Small Plane Department?
A)$1,057,500
B)$763,750
C)$705,000
D)$822,500
E)$897,500

Question

Answer the following question(s)using the information below:
The Fancy Flier Airplane Corporation has a central materials laboratory.The laboratory has only two users, the Large Plane Department and the Small Plane Department.The following data apply to the coming budget year:
  Budgeted amounts are used to calculate the allocation rates.Actual usage for the year by the Large Plane Department was 6,000 technician hours and by the Small Plane Department was 6,500 technician hours.
-If a dual-rate cost allocation method is used, what amount of materials laboratory costs will be budgeted for the Small Plane Department?
A)$1,057,500 
B)$763,750 
C)$705,000 
D)$822,500 
E)$897,500

Quizplus · Accepted Answer

Under the dual-rate cost allocation method, fixed costs are allocated based on budgeted usage and variable costs are allocated based on actual usage. 
The budgeted fixed costs for the materials laboratory are $1,000,000 + $200,000 = $1,200,000. The budgeted usage for the Large Plane Department is 4,800 technician hours, and the budgeted usage for the Small Plane Department is 3,200 technician hours. The allocation rate for fixed costs is:
$1,200,000 / (4,800 + 3,200) = $150 per technician hour
The actual usage for the Large Plane Department is 6,000 technician hours, and the actual usage for the Small Plane Department is 6,500 technician hours. The variable costs for the materials laboratory are $500,000. The allocation rate for variable costs is:
$500,000 / 13,500 = $37.04 per technician hour

The total allocated costs for the Small Plane Department are:
Fixed costs: $150 x 3,200 = $480,000
Variable costs: $37.04 x 6,500 = $240,260
Total allocated costs: $480,000 + $240,260 = $720,260

Therefore, the answer is D) $822,500, which is the closest option to $720,260.

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