The Copy Department in the College of Business at State University provides photocopying services for both the Marketing and Economics Departments. The following budget has been prepared for the year.
$$\begin{array} { l c }
\text { Available capacity } & 6,000,000 \text { pages } \
\text { Budgeted usage: } & \
\text { Marketing } & 3,600,000 \text { pages } \
\text { Economics } & 1,800,00 \text { pages } \
\text { Cost equation } & \$ 120,000 + \$ 0.025 \text { per page }
\end{array}$$
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If the Copy Department uses a dual rate for allocating its costs based on usage, how much cost will be allocated to the Economics Department?
A) $85,000.
B) $90,000.
C) $105,000.
D) $120,000.

Question

The Copy Department in the College of Business at State University provides photocopying services for both the Marketing and Economics Departments. The following budget has been prepared for the year.
$$\begin{array} { l c } 
\text { Available capacity } & 6,000,000 \text { pages } \
\text { Budgeted usage: } & \
\text { Marketing } & 3,600,000 \text { pages } \
\text { Economics } & 1,800,00 \text { pages } \
\text { Cost equation } & \$ 120,000 + \$ 0.025 \text { per page }
\end{array}$$
-
If the Copy Department uses a dual rate for allocating its costs based on usage, how much cost will be allocated to the Economics Department?
A) $85,000.
B) $90,000.
C) $105,000.
D) $120,000.

Quizplus · Accepted Answer

The Economics Department is budgeted to use 1,800,000 pages, which is 30% of the total budgeted usage. Therefore, the Economics Department will be allocated 30% of the total cost, which is $120,000 + (0.025 x 1,800,000) = $85,000.