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, how much cost will be allocated to the Economics Department, assuming the Economics Department actually made 1,500,000 copies during the year?
A) $77,500.
B) $92,500.
C) $132,500.
D) $112,500.

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, how much cost will be allocated to the Economics Department, assuming the Economics Department actually made 1,500,000 copies during the year?
A) $77,500.
B) $92,500.
C) $132,500.
D) $112,500.

Quizplus · Accepted Answer

The dual-rate method separates fixed and variable costs. Fixed costs are allocated based on budgeted usage, and variable costs are based on actual usage. Fixed cost allocation for Economics: $120,000 * (1,800,000/5,400,000) = $40,000. Variable cost for actual usage: 1,500,000 * $0.025 = $37,500. Total = $40,000 + $37,500 = $77,500.