The Copy Department in the College of Business at State University provides photocopying service for both the Marketing and Economics Department.The following budget has been prepared for the year. If the Copy Department uses a dual-rate for allocating its costs,how much cost will be allocated to the Marketing Department,assuming the Marketing Department actually made 3,000,000 copies during the year?
A)$135,000.
B)$150,000.
C)$155,000.
D)$170,000.

Question

The Copy Department in the College of Business at State University provides photocopying service for both the Marketing and Economics Department.The following budget has been prepared for the year.   If the Copy Department uses a dual-rate for allocating its costs,how much cost will be allocated to the Marketing Department,assuming the Marketing Department actually made 3,000,000 copies during the year?
A)$135,000. 
B)$150,000. 
C)$155,000. 
D)$170,000.

Quizplus · Accepted Answer

Using the dual-rate method, the fixed costs of $90,000 are divided equally between the two departments, which comes to $45,000 each. The variable costs are allocated based on the actual number of copies made by each department.

For the Marketing Department, the variable cost per copy is $0.04, which is calculated as ($120,000 - $90,000) / 3,000,000 copies.

Multiplying the variable cost per copy by the actual number of copies made (3,000,000) gives a total variable cost of $120,000 for the Marketing Department.

Adding the fixed cost allocation of $45,000 gives a total cost allocation of $165,000 for the Marketing Department. Therefore, the correct answer is C) $155,000.