Exquisite Department Store has a new promotional program that offles a free gft
ID: 2597579 • Letter: E
Question
Exquisite Department Store has a new promotional program that offles a free gft wrapping service for gits at a budgeted foxed cost of $6,800 each month. The budgeted variable cost to gift wrap an item is $0.30 During the most recent month, the department budgeted to wrap 6.800 gits Although the service is free to customers, a gift-wrapping service cost allocation is made to the department where the item was purchased. The customer-service department reported the folow for the most recent month ts customers. Exquisite's customer-service department has practicall capacity to (Click the icon to view the actual and budgeted units ) Read the tequirements Requirement 1. Using the single-rate method, allocate gift wrapping costs to different departments in these thres way Start with allocating (a), then (b), and inally (c) (Round all of your answers to the nearest cent) Data Table Budgeted rate per tem Actual Items tems Wrapped Wrapped Women's Appare 2,470 840 1,825 425 1 240 6,800 2,140 780 1,595 530 1.106 6.150 Men's Apparel Domestics Total Women's Apparel Fragrances Men's Apparel Total Requirement 2. Using the dual-rate method, compute the amount allocated to each department capacity. (b) foxed costs are allocated based on budgeted usage of git-wrapping services, and (c all of your answers to the nearest cent) Print Done Variable Fixed Total Rate per item Women's ApparelL Fragrances Men's Apparei Backspace 6Explanation / Answer
Solution:
Budgeted number of gifts wrapped = 6,800
Budgeted fixed costs = $6,800
Fixed cost per gift based on budgeted volume = $6,800 ÷ 6,800 =$1.00
Average budgeted variable cost per gift = 0.30
Total cost per gift wrapped $1.30
1.a. Allocation based on budgeted usage of gift-wrapping services:
Giftware (2,470 × $1.30) $3,211
Women’s Apparel (840× $1.30) 1,092
Fragrances (1,825 × $1.30) 2,372.50
Men’s Apparel (425 × $1.30) 552.50
Domestics (1,240 × $1.45) 1,612.00
Total $ 8,840
1.b. Allocation based on actual usage of gift-wrapping services:
Giftware (2,140 × $1.30) $2,782
Women’s Apparel (780× $1.30) 1,014
Fragrances (1,595 × $1.30) 2,073.50
Men’s Apparel (530 × $1.30) 689
Domestics (1,105 × $1.30) 1,436.50
Total $ 7,995
1.c. Budgeted number of gifts wrapped = 8,000
Budgeted fixed costs = $6,800
Fixed cost per gift based on budgeted volume = $6,800 ÷ 8,000 =$0.85
Average budgeted variable cost per gift = 0.30
Total cost per gift wrapped $1.15
Allocation based on actual usage of gift-wrapping services:
Giftware (2,140 × $1.15) $2,461
Women’s Apparel (780× $1.15) 897
Fragrances (1,595 × $1.15) 1,834.25
Men’s Apparel (530 × $1.15) 609.50
Domestics (1,105 × $1.15) 1,270.75
Total $ 7,072.5
2. Budgeted rate for fixed costs = Budgeted fixed costs Practical capacity
= $6,800 ÷ 8,000 gifts = $0.85 per gift
Fixed costs allocated on budgeted usage.
Rate for variable costs = $0.30 per item
Variable costs based on actual usage
Allocation:
Department Variable Costs Fixed Costs Total
Giftware 2,470 × $0.30 =$741 2,140 × $0.85 =$1,819 $2,560
Women’s Apparel 840 × $0.30 =252 780 × $0.85 = 663 915
Fragrances 1,825 × $0.30 =547.50 1,595 × $0.85 =1,355.75 1,903.25
Men’s Apparel 425 × $0.30=127.50 530 × $0.85 =450.50 578
Domestics 1,240 × $0.30=372.00 1,105 × $0.85 =939.25 1,311.25
Total $2,040 $5,227.50 $7,267.50
3. The dual rate method allocated fixed and variable costs differently. Fixed costs are allocated proportionately to the departments causing the incurrence ofthose costs based on the budgeted usage of each department. The costs allocated to a department are not affected by the usage by other departments.
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