Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, Graphic Design, and Nursing. The college shares copy services with a total monthly cost of $15,000. The college is considering allocating costs using either number of copies or operating income as its allocation base. Data for the month of September, 2012 follows:

- If Bright College uses operating income as the allocation cost base, how much copy costs would be allocated to the Graphic Design Division?

Question

Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, Graphic Design, and Nursing. The college shares copy services with a total monthly cost of $15,000. The college is considering allocating costs using either number of copies or operating income as its allocation base. Data for the month of September, 2012 follows:

- If Bright College uses operating income as the allocation cost base, how much copy costs would be allocated to the Graphic Design Division?

Quizplus · Accepted Answer

Operating income is the income from operations, which is calculated by subtracting the cost of goods sold and operating expenses from revenue. In this case, the operating income is $15,000. The Graphic Design Division's operating income is $5,000, which is 33.33% of the total operating income. Therefore, the Graphic Design Division would be allocated 33.33% of the copy costs, which is $3,750.

Bright College Is a Community College Located in Bright, CA