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 2,000 to 3,000 hours: Fixed operating costs per year $500,000 Variable operating costs $800 per hour Budgeted long-run usage per year: Flashlight Division 2,000 hours Night Light Division 1000 hours Practical capacity 4,000 hours Assume that practical capacity is used to calculate the allocation rates. Actual usage for the year by the Flashlight Division was 1,500 hours and by the Night Light Division was 800 hours.
1) 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.
A) $1,247,500
B) $1,300,000
C) $1,487,500
D) $1,387,500
2) 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.
A) $810,000
B) $765,000
C) $790,000
D) $750,000
