Illumination Corp operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year:
Budgeted costs of operating the plant for 2000 to 3000 hours:
| Fixed operating costs per year | $480,000 |
| Variable operating costs | $700 | per hour |
Budgeted long-run usage per year:
| Flashlight Division | 1500 | hours |
| Night Light Division | 600 | hours |
| Practical capacity | 3000 | hours |
Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1400 hours and by the Night Light Division was 700 hours. If a dual-rate cost-allocation method is used, what amount of cost will be allocated to the Night Light Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.
◦ $516,000
◦ $586,000
◦ $532,000
◦ $602,000
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Solution (Polynomial Long Division)
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