The Document Creation Center (DCC)for Alegis Corp.provides photocopying and document services for three departments in the St.Paul office.The following budget has been prepared for the year. If DCC uses a dual-rate for allocating its costs,how much cost will be allocated to the Software Development Department,assuming the Software Development Department actually made 1,160,000 copies during the year?
A)$75,400.
B)$98,800.
C)$81,200.
D)$84,312.

Question

The Document Creation Center (DCC)for Alegis Corp.provides photocopying and document services for three departments in the St.Paul office.The following budget has been prepared for the year.  If DCC uses a dual-rate for allocating its costs,how much cost will be allocated to the Software Development Department,assuming the Software Development Department actually made 1,160,000 copies during the year?
A)$75,400. 
B)$98,800. 
C)$81,200. 
D)$84,312.

Quizplus · Accepted Answer

Using the dual-rate method, we first calculate the budgeted cost per copy for each activity based on the budgeted cost and budgeted activity level.

For photocopying: 
Budgeted cost = $149,000 
Budgeted activity level = 2,500,000 copies 
Budgeted cost per copy = $149,000 / 2,500,000 copies = $0.0596

For document services: 
Budgeted cost = $451,500 
Budgeted activity level = 100,000 pages 
Budgeted cost per page = $451,500 / 100,000 pages = $4.515

Next, we apply the budgeted rate for each activity to the actual activity level of the department to allocate the costs:

For the Software Development department: 
Actual photocopying = 1,160,000 copies 
Actual document services = 40,000 pages

Allocated cost for photocopying = $0.0596 x 1,160,000 copies = $69,056 
Allocated cost for document services = $4.515 x 40,000 pages = $180,600 
Total allocated cost = $69,056 + $180,600 = $249,656

Therefore, the answer is B) $98,800.