Illumination Corporation 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 | $500,000 |
| Variable operating costs | $900 | per hour |
Budgeted long-run usage per year:
| Flashlight Division | 2000 | hours |
| Night Light Division | 1000 | hours |
| Practical capacity | 4000 | hours |
Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1500 hours and by the Night Light Division was 800 hours. If a single-rate cost-allocation method is used, what amount of cost will be allocated to the Flashlight Division? Assume actual usage is used to allocate operating costs.
◦ $2,050,000
◦ $1,850,000
◦ $1,200,000
◦ $1,537,500
Plant
Plant
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