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 that fixed and variable costs are allocated according to capacity used then the fixed and variable costs allocated to the Sauna 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 that fixed and variable costs are allocated according to capacity used then the fixed and variable costs allocated to the Sauna 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 based on capacity used for the Sauna Department, we need to know the capacity allowed and the capacity used. Based on the table, the Sauna Department had 80% capacity usage (16,000/20,000), while the Weight Room Department had 90% capacity usage (18,000/20,000).

Variable costs allocated to Sauna Department = 120,000 x 80% = $96,000
Variable costs allocated to Weight Room Department = 120,000 x 90% = $108,000

Total variable costs allocated = $96,000 + $108,000 = $204,000

Fixed costs allocated to Sauna Department = 80,000 x (16,000/20,000) = $64,000
Fixed costs allocated to Weight Room Department = 80,000 x (18,000/20,000) = $72,000

Total fixed costs allocated = $64,000 + $72,000 = $136,000

Therefore, the fixed and variable costs allocated to the Sauna Department will be $40,000 and $60,000, respectively (option D).

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