Data Source Media manufactures cassettes and CDs. Management is attempting to set the budget for the coming year. Two divisions (Cassette and CD) of the company utilize one plant location. The following data have been prepared for review. What is the cost per hour of use for the Cassette department and the CD Department assuming budgeted usage is the allocation base and a single-rate method is used?
A) $960.00
B) $600.00
C) $982.98
D) $1,021.28
E) $1,582.98

Question

Data Source Media manufactures cassettes and CDs. Management is attempting to set the budget for the coming year. Two divisions (Cassette and CD) of the company utilize one plant location. The following data have been prepared for review.  What is the cost per hour of use for the Cassette department and the CD Department assuming budgeted usage is the allocation base and a single-rate method is used?
A) $960.00 
B) $600.00 
C) $982.98 
D) $1,021.28 
E) $1,582.98

Quizplus · Accepted Answer

Using the single-rate method, we first need to calculate the total budgeted overhead cost for both departments:

Total budgeted overhead cost = Budgeted maintenance and rent cost + Budgeted power cost
= $176,000 + $384,000
= $560,000

Next, we need to calculate the total budgeted usage for both departments:

Total budgeted usage = Budgeted usage for Cassette department + Budgeted usage for CD department
= 4,000 hours + 2,000 hours
= 6,000 hours

The cost per hour of use for both departments can then be calculated as follows:

Cost per hour of use = Total budgeted overhead cost ÷ Total budgeted usage
= $560,000 ÷ 6,000 hours
= $98.298, or rounded to $982.98

Therefore, the correct answer is C.

Data Source Media Manufactures Cassettes and CDs