Miracle Consulting Corporation has its headquarters in Chicago and operates from three branch offices in Portland, Dallas, and Miami. Two of the company's activity cost pools are General Service and Research Service. These costs are allocated to the three branch offices using an activity-based costing system. Information for next year follows:
$$\begin{array} { l l r }
\text { Activity Cost Pool } & \text { Activity Measure } & \text { Estirnated Cost } \
\text { General service } & \text { \% of time devoted to branch } & \$ 700,000 \
\text { Research service } & \text { Computer time } & \$ 140,000
\end{array}$$
Estimated branch data for next year is as follows:
$\begin{array}{lrr}
&\text { \% of time}&\text { Computer time}\
\text { Portland } & 30 \% & 200,000 \text { minutes } \
\text { Dallas } & 60 \% & 150,000 \text { minutes } \
\text { Miami } & 10 \% & 50,000 \text { minutes }
\end{array}$
How much of the headquarters cost allocation should the Dallas office expect to receive next year?
A) $280,000.
B) $409,500.
C) $472,500.
D) $504,000.

Question

Miracle Consulting Corporation has its headquarters in Chicago and operates from three branch offices in Portland, Dallas, and Miami. Two of the company's activity cost pools are General Service and Research Service. These costs are allocated to the three branch offices using an activity-based costing system. Information for next year follows:
$$\begin{array} { l l r } 
\text { Activity Cost Pool } & \text { Activity Measure } & \text { Estirnated Cost } \
\text { General service } & \text { \% of time devoted to branch } & \$ 700,000 \
\text { Research service } & \text { Computer time } & \$ 140,000
\end{array}$$
Estimated branch data for next year is as follows:
$\begin{array}{lrr}
&\text {  \% of time}&\text { Computer time}\
\text { Portland } & 30 \% & 200,000 \text { minutes } \
\text { Dallas } & 60 \% & 150,000 \text { minutes } \
\text { Miami } & 10 \% & 50,000 \text { minutes }
\end{array}$ 
How much of the headquarters cost allocation should the Dallas office expect to receive next year?
A) $280,000.
B) $409,500.
C) $472,500.
D) $504,000.

Quizplus · Accepted Answer

The Dallas office should receive 60% of the General Service cost and a proportionate share of the Research Service cost based on computer time. Calculation: General Service: $700,000 * 60% = $420,000. Research Service: ($140,000 * 150,000) / (200,000 + 150,000 + 50,000) = $52,500. Total = $420,000 + $52,500 = $472,500.

Miracle Consulting Corporation Has Its Headquarters in Chicago and Operates