The Speedjet Aircraft Corporation has a central materials laboratory. The labora

Question

The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year: Budgeted costs of operating the materials laboratory for 150 000 to 250 000 technician hours per year:

Fixed costs per year                                              $ 8 comma 800 comma 000

Variable costs $ 71 per technician hour   

Budgeted longminus run usage in hours per year:

Large Plane Department 100 000 technician hours

Small Plane Department 60 000 technician hours   

Budgeted amounts are used to calculate the allocation rates.

Actual usage for the year by the Large Plane Department was 90 000 technician hours and by the Small Plane Department was 110 000 technician hours. If a dualminus

rate costminus allocation method is used, what amount of materials laboratory costs will be allocated to the Large Plane Department? Assume budgeted usage is used to allocate fixed materials laboratory costs and actual usage is used to allocate variable materials laboratory costs.

A.

$ 11 comma 890 comma 000

B. $ 12 comma 600 comma 000

C.$ 11 comma 340 comma 000

D.$ 12 comma 050 comma 000

Explanation / Answer

A.

Budgeted materials laboratory costs for Large Plane Department

= [(100,000/ (100,000+60,000)) x $8,800,000] + (100,000 x $71)

= $5,500,000 + $7,100,000

= $12,600,000

Ans is B.

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