The Speedjet Aircraft Corporation has a central materials laboratory.The laboratory has only two users,the Large Plane Department and the Small Plane Department.The following data apply to the coming budget year:
Budgeted costs of operating the materials laboratory
For 150,000 to 250,000 technician hours per year:

Budgeted long-run usage in hours per year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 70,000 technician hours and by the Small Plane Department was 90,000 technician hours.If a dual-rate cost-allocation method is used,what amount of materials laboratory costs will be budgeted for the Large Plane Department?

Question

The Speedjet Aircraft Corporation has a central materials laboratory.The laboratory has only two users,the Large Plane Department and the Small Plane Department.The following data apply to the coming budget year:
Budgeted costs of operating the materials laboratory
For 150,000 to 250,000 technician hours per year:

Budgeted long-run usage in hours per year:

Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 70,000 technician hours and by the Small Plane Department was 90,000 technician hours.If a dual-rate cost-allocation method is used,what amount of materials laboratory costs will be budgeted for the Large Plane Department?

Quizplus · Accepted Answer

The fixed cost allocation rate is $34.40 ($8,600,000 / (90,000 + 160,000)while the variable rate is $75.
Budgeted materials laboratory costs for Large Plane Department = ($34.40 + $75)x 90,000 = $9,846,000

The Speedjet Aircraft Corporation Has a Central Materials Laboratory