2.3) Tyler’s Consulting Company has purchased a new $15,000 copier. This overhea

Question

2.3) 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 425,000

Note: Cost allocations are computed to 4 significant digits. Resulting values are rounded to the whole dollar.
If the purchasing department makes 140,260 copies this year what will be their allocated overhead?

2.4) Which of the following costs are always incremental and relevant in decision analysis?
opportunity costs and joint costs
joint costs and avoidable costs
avoidable costs and opportunity costs
sunk costs and avoidable costs

Fast Delivery Company delivers packages and business documents for local businesses located in the Houston metropolitan area. If the company decided to adopt an ABC costing system to accumulate costs for its service, what would be an appropriate cost driver to use for the cost of the packaging envelopes provided to customers?
Number of miles to be driven in the delivery
Number of customers
Amount of fuel used in the truck
Number of packages

Explanation / Answer

2.3)

The cost of the copier is $15,000 for 1m copies.

Therefore, this would means $0.015/ copies. Each department 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 140,260 copies, they would then gets allocated 140,260 x $0.0154 = $2,160

2.4) Avoidable costs and opportunity costs.

3rd question: Number of miles to be driven in the delivery!

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