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.
-The fixed and variable costs allocated to the Barbell Department are
A)$50,000 and $75,000, respectively.
B)$50,000 and $60,000, respectively.
C)$30,000 and $75,000, respectively.
D)$30,000 and $60,000, respectively.
E)$30,000 and $50,000 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.
-The fixed and variable costs allocated to the Barbell Department are
A)$50,000 and $75,000, respectively. 
B)$50,000 and $60,000, respectively. 
C)$30,000 and $75,000, respectively. 
D)$30,000 and $60,000, respectively. 
E)$30,000 and $50,000 respectively.

Quizplus · Accepted Answer

The Barbell Department had a capacity available of 10,000 hours and a capacity used of 8,000 hours. This means that they operated at 80% capacity (8,000/10,000).
First, let's allocate the fixed costs. Since the Barbell Department had 80% capacity usage, they should be allocated 80% of the common fixed costs. 
80% of $80,000 = $64,000 allocated to the Barbell Department.
Now let's allocate the variable costs. The Barbell Department had actual usage of 8,000 hours, so they should be allocated 8,000/20,000 (which is 40%) of the common variable costs.
40% of $120,000 = $48,000 allocated to the Barbell Department.
Therefore, the fixed and variable costs allocated to the Barbell Department are $64,000 and $48,000 respectively, which is option B.

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