Cincinnati Million, Inc. operates two user divisions as separate cost objects. T
ID: 2461958 • Letter: C
Question
Cincinnati Million, Inc. operates two user divisions as separate cost objects. To determine the costs of each division, the company allocates common costs to the divisions. During the past month, the following common costs were incurred:
The following information is available concerning various activity measures and service usages by each of the divisions:
If common computer service costs are allocated using computer time as the allocation basis, what is the computer cost allocated to Division B?
Computer services (85% fixed) $276,000 Building occupancy 616,000 Personnel costs 126,000 Total common costs $1,018,000Explanation / Answer
Total computer time used in two divisions = 360 + 380 = 740 hours
Total common computer service cost = $276000
Allocation rate of common computer service costs = $276000 / 740 hours = $372.97 / hour
Computer cost allocated to Division B = 380 hours x $372.97/hour = $141729