Barrington Box Enterprises has two divisions,large and small,that share the common costs of the company's communications network.The annual common costs are $4,500,000.You have been provided with the following information for the upcoming year:
$$\begin{array} { | l | r | r | }
\hline & \text { Calls } & \begin{array} { r }
\text { Time on } \
\text { Network (hous) }
\end{array} \
\hline \text { Large } & 100,000 & 120,000 \
\hline \text { Small } & 80,000 & 330,000 \
\hline
\end{array}$$The cost accountant determined $2,700,000 of the communication network's costs were fixed and should be allocated based on the number of calls.The remaining costs should be allocated based on the time on the network.What is total communication network costs allocated to the Small Box Division,assuming the company uses dual-rates to allocate common costs?
A) $2,520,000.
B) $1,800,000.
C) $1,320,000.
D) $1,200,000.

Question

Barrington Box Enterprises has two divisions,large and small,that share the common costs of the company's communications network.The annual common costs are $4,500,000.You have been provided with the following information for the upcoming year: 
$$\begin{array} { | l | r | r | } 
\hline & \text { Calls } & \begin{array} { r } 
\text { Time on } \
\text { Network (hous) }
\end{array} \
\hline \text { Large } & 100,000 & 120,000 \
\hline \text { Small } & 80,000 & 330,000 \
\hline
\end{array}$$The cost accountant determined $2,700,000 of the communication network's costs were fixed and should be allocated based on the number of calls.The remaining costs should be allocated based on the time on the network.What is total communication network costs allocated to the Small Box Division,assuming the company uses dual-rates to allocate common costs?
A) $2,520,000.
B) $1,800,000.
C) $1,320,000.
D) $1,200,000.

Quizplus · Accepted Answer

The fixed costs of $2,700,000 are allocated based on the number of calls. The Small Division makes 80,000 out of a total of 180,000 calls, so it gets 80,000/180,000 of the fixed costs, which is $1,200,000. The remaining $1,800,000 of variable costs are allocated based on time on the network. The Small Division uses 330,000 out of a total of 450,000 hours, so it gets 330,000/450,000 of the variable costs, which is $1,320,000. Adding both allocations gives a total of $2,520,000.

Barrington Box Enterprises Has Two Divisions,large and Small,that Share the Common