Exercise E6-6 Cost Allocation Process Apex Company\'s Copy Department, which doe

Question

Exercise E6-6 Cost Allocation Process Apex Company's Copy Department, which does all of the photocopying for the Sales Department and the Administration Department, budgets the following costs for the year, based on the expected activity of 5,000,000 copies. Salaries (Fixed) $80,000 Employee benefits (Fixed) 10,000 Depreciation of copy machines (Fixed) 10,000 Utilities (Fixed) 5,000 Paper (Variable)                  Per copy: $0.01 50,000 Toner (Variable)                  Per copy: $0.01 50,000 The costs are assigned to two pools, one for fixed and one for variable costs. The costs are then assigned to the Sales Department and the Administrative Department. Fixed costs are assigned on a lump-sum basis, 40% to Sales and 60% to Administration. The variable costs are assigned at a rate of $0.02 per copy. Required: Assuming 4,800,000 copies were made during the year, 2,500,000 for Sales and 2,300,000 for Administration, calculate the Copy Department costs allocated to Sales and Administration. Total costs to be allocated: Title Amount Title Amount Title Amount Title Amount Total: Formula Costs allocated to Sales: Title Formula Title Formula Title Formula Costs allocated to Admin: Title Formula Title Formula Title Formula Exercise E6-6 Cost Allocation Process Apex Company's Copy Department, which does all of the photocopying for the Sales Department and the Administration Department, budgets the following costs for the year, based on the expected activity of 5,000,000 copies. Salaries (Fixed) $80,000 Employee benefits (Fixed) 10,000 Depreciation of copy machines (Fixed) 10,000 Utilities (Fixed) 5,000 Paper (Variable)                  Per copy: $0.01 50,000 Toner (Variable)                  Per copy: $0.01 50,000 The costs are assigned to two pools, one for fixed and one for variable costs. The costs are then assigned to the Sales Department and the Administrative Department. Fixed costs are assigned on a lump-sum basis, 40% to Sales and 60% to Administration. The variable costs are assigned at a rate of $0.02 per copy. Required: Assuming 4,800,000 copies were made during the year, 2,500,000 for Sales and 2,300,000 for Administration, calculate the Copy Department costs allocated to Sales and Administration. Total costs to be allocated: Title Amount Title Amount Title Amount Title Amount Total: Formula Costs allocated to Sales: Title Formula Title Formula Title Formula Costs allocated to Admin: Title Formula Title Formula Title Formula

Explanation / Answer

Total FCs = Sal+EMp Benefit+Dep+Util

= 80000+10000+10000+5000 = 105,000

FCs are period costs & will not change with volume.

Total costs to be allocated:

Salaries (Fixed) $80,000

Employee benefits (Fixed) 10,000

Depreciation of copy machines (Fixed) 10,000

Utilities (Fixed) 5,000

Total FCs $105,000

Costs allocated to Sales:

FC 40%*105,000 = 42000

VC 2,500,000*$0.02 = 50000

Total $92,000

Costs allocated to Admin:

FC 60%*105,000 = 63000

VC 2,300,000*$0.02 = 46000

Total $109,000

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