FIGURE 7-4 Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made.
During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000.
Normal and actual activity (copies made) are as follows:
Refer to Figure 7-4. Support department costs NOT allocated to the two copy centers are

Question

FIGURE 7-4 Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made.
During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000.
Normal and actual activity (copies made) are as follows:
 Refer to Figure 7-4. Support department costs NOT allocated to the two copy centers are

Quizplus · Accepted Answer

To determine the total support department costs allocated to the two copy centers, we need to first calculate the variable and fixed cost rates:

Variable cost rate = Actual variable costs / Actual activity 
Variable cost rate = $128,000 / 7,000,000 copies 
Variable cost rate = $0.0182 per copy

Fixed cost rate = Actual fixed costs / Normal activity 
Fixed cost rate = $72,000 / 6,000,000 copies 
Fixed cost rate = $0.012 per copy

Using these rates, we can allocate the support department costs to each copy center:

Copies Plus Print 1: 
Total copies made = 5,000,000 copies 
Variable cost = $0.0182 per copy x 5,000,000 copies = $91,000 
Fixed cost = $0.012 per copy x 6,000,000 copies = $72,000 
Total support department costs = $91,000 + $72,000 = $163,000

Copies Plus Print 2: 
Total copies made = 2,000,000 copies 
Variable cost = $0.0182 per copy x 2,000,000 copies = $36,400 
Fixed cost = $0.012 per copy x 6,000,000 copies = $72,000 
Total support department costs = $36,400 + $72,000 = $108,400

Total support department costs allocated to the copy centers = $163,000 + $108,400 = $271,400

To find the support department costs NOT allocated to the copy centers, we subtract this amount from the total expected support department costs:

Expected total support department costs = $200,000 
Actual total support department costs = $128,000 + $72,000 = $200,000 
Total support department costs allocated to the copy centers = $271,400 
Support department costs NOT allocated to the copy centers = $200,000 - $271,400 = -$71,400

Since we have a negative amount, we know that there was overallocation of support department costs. To adjust for this, we need to reduce the allocated support department costs by $71,400:

Adjusted total support department costs allocated to the copy centers = $271,400 - $71,400 = $200,000

Thus, the support department costs NOT allocated to the copy centers are $200,000 - $163,000 - $108,400 = $8,400. Therefore, the correct answer is C.

FIGURE 7-4 Copies Plus Print Operates a Copy Business at Two