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 | $7,200,000 |
| Variable costs | $71 | per technician hour |
Budgeted long-run usage in hours per year:
| Large Plane Department | 90,000 | technician hours |
| Small Plane Department | 70,000 | technician hours |
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 80,000 technician hours and by the Small Plane Department was 120,000 technician hours. If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be allocated to the Small Plane Department? Assume budgeted usage is used to allocate fixed materials laboratory costs and actual usage is used to allocate variable materials laboratory costs.
◦ $13,920,000
◦ $11,670,000
◦ $10,370,000
◦ $8,120,000
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