Triton Company\'s copy department, which does almost all of the photocopying for

Question

Triton Company's copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity of copies:

The costs are assigned to two cost pools, one for fixed and one for variable costs. The costs are then assigned to the sales department and the administrative department. Fixed costs are assigned on a lump-sum basis, 40 percent to sales and 60 percent to administration. The variable costs are assigned at a rate of 2 cents per copy.

Assuming the following copies were made during the year, 2,641,750 for sales and 2,527,750 for administration, calculate the copy department costs allocated to sales.

Explanation / Answer

Costs are assigned to two cost pools, one for fixed and one for variable costs

Fixed costs are assigned on 40 percent to sales

Total fixed cost =$89000 + $10000 + $10000 + $5000

= $114000

Fixed cost to sales department = 40% * 114000 = $45600

Variable cost to sale's copies = 2641750 * 1% = $26417.5

copy deparment cost to sales $72017.5

Note:-    variable cost 1% per copy cost for sale because , the costs are assigned to the sales department (1%) and ,the administrative department(1%) , totalling 2% of variable cost .

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