Answer the following questions using the information below:
The Laserlight Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year:
Budgeted costs of operating the plant for 2,000 to 3,000 hours:
Budgeted long-run usage per year:
Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1,400 hours and by the Night Light Division was 600 hours.
-If a single-rate cost-allocation method is used, what amount of cost will be allocated to the Flashlight Division? Assume actual usage is used to allocate operating costs.
A)$1,140,000
B)$1,200,000
C)$1,500,000
D)$1,050,000

Question

Answer the following questions using the information below:
The Laserlight Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year:
Budgeted costs of operating the plant for 2,000 to 3,000 hours:
  Budgeted long-run usage per year:
  Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1,400 hours and by the Night Light Division was 600 hours.
-If a single-rate cost-allocation method is used, what amount of cost will be allocated to the Flashlight Division? Assume actual usage is used to allocate operating costs.
A)$1,140,000 
B)$1,200,000 
C)$1,500,000 
D)$1,050,000

Quizplus · Accepted Answer

With the single-rate cost-allocation method, the total budgeted operating cost for the plant is allocated based on a single allocation rate applied to the actual usage of both divisions. The total budgeted operating cost for the plant is $1,500,000 ($900,000 for the Flashlight Division and $600,000 for the Night Light Division). The allocation rate is calculated as:
$1,500,000 / 2,000 hours = $750 per hour
The Flashlight Division used 1,400 hours, so the allocated cost would be:
$750 per hour x 1,400 hours = $1,050,000 
Therefore, the answer is D, $1,050,000.

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