Tyler\'s Consulting Company has purchased a new $15,000 copier. This overhead co

Question

Tyler's Consulting Company has purchased a new $15,000 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those are the only departments which will be able to access the machine. The company has decided to allocate the cost based on the number of copies made by each department. The copier is estimated to provide 1 million copies over its life. Each division has estimated the number of copies which will be made over the life of the copier.

Purchasing $350,000
Accounting $200,000
Information Tech $400,000
Note: cost allocation is are computed to 4 significant digits.
How much overhead will be allocated each time a copy is made?
a) 63.3333
b).0158
c)66.6657
d).0150

Explanation / Answer

the cost of the copier is $15,000 for 1m copies, this would means $0.015/ copies. Each dept were asked to estimate how many copies they would make over the life (1m). Based on their own estimate, I would then calculate the total estimated cost that would be bore by each dept. The rate/ copies would then derived from each dept total shared cost/ estimated usage. So, here's what I will do: Usages Share of Cost Cost/ Copies P 350,000.0000; 5,384.6154; 0.0154 A 200,000.0000; 3,076.9231; 0.0154 IT 425,000.0000; 6,538.4615; 0.0154 975,000.0000; 15,000.0000; 1.0000 So, if Purchasing make 72,000 copies, they would then gets allocated 72,000 x 0.0154 = $1,108

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