Lyres, Cheeterz, and Phools, attorneys-at-law, specialize in three areas: crimin

Question

Lyres, Cheeterz, and Phools, attorneys-at-law, specialize in three areas: criminal, civil, and family law. When specifications for a new computer system were established, the criminal law division needed 60% of the capacity, civil law 25%, and family law 15%. The partners agreed that the fixed costs of the computer department would be allocated on these percentages. Variable costs for the computer department would be allocated on the number of computer minutes each division used. The computer department's budgeted fixed costs are $700,000, and the budgeted variable costs $150,000. The firm estimates that 400,000 minutes of computer time will be used next period.
Note: Cost allocation rates are computed to 3 significant digits.
Reference: Ref 6-1

If the criminal law division actually uses 190,000 minutes of computer time, what is the total amount of computer department costs that will be allocated to the criminal law division?
Answer


$403,750.

$510,000.

$90,000.

$491,250.

Explanation / Answer

the answer is $491,250
Explanation:
the fixed cost can be divisible among 3 departments like bleow:
criminal 60%
civil 25%
family 15 %
and actul fixed cost estimated for next year = $700000
on $ 700000 ,the 60% of the portion allocate to the criminal deparment:
=$700000*60%
=$420000
variblecost estimated = $150000
and minitues were used by the computer = 400000 minitues
per minitue rate =$150000/ 400000
=$0.375
criminla division used 190000 minitues then ,
vriable costt = 190000* 0.375
=$71250
Total cost=Fixed cost + Variable cost
=$420000+$71250
=$491250

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