Fenway Telcom has three divisions, commercial, retail, and consumer, that share

Question

Fenway Telcom has three divisions, commercial, retail, and consumer, that share the common costs of the company's computer server network. The annual common costs are $1,104,000. You have been provided with the following information for the upcoming year:

  

  

What is the allocation rate for the upcoming year, assuming Fenway Telcom uses the single-rate method and allocates common costs based on the number of connections?

   Connections Time on
Network (hours)   Commercial 34,500 27,600   Retail 46,000 34,500   Consumer   57,500 75,900

Explanation / Answer

the allocation rate for the upcoming year=The annual common costs are $1,104,000/number of connections=$1,104,000/34,500+46,000+57,500= $1,104,000/138,000=$8 per connection.

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