79 The Trinity power plant that services all manufacturing f

7-9. The Trinity power plant that services all manufacturing facilities of Lake Eire Automotive Suppliers Inc. has a budget for the coming year. This budget has been expressed in the following monthly terms:

                        Variable:                    $16,000

                        Fixed:                         24,000

                        Total                           $40,000

Department              Practical Capacity (Kwh)              Expected monthly usage

Cleveland                              64,000                                    22,000

Akron                                   42,000                                    18,000

Canton                                 28,000                                    20,000

Youngstown                        26,000                                    20,000

                                           160,000                                  80,000

7. Required: What budgeted amounts will be allocated to each manufacturing department if the rate is calculated on practical capacity? Round percentages to two place past the decimal point.

Allocated based on practical capacity:

Cleveland      _______   =       % * $            =   $

Akron            

Canton          

Youngstown

8. Required: What budgeted amounts will be allocated to each manufacturing department if the rate is calculated on expected monthly usage? Round percentages to two place past the decimal point.

Allocated based on expected monthly usage:

Cleveland      _______ =             % * $               = $

Akron            

Canton          

Youngstown

9. Required: What budgeted amounts will be allocated to each manufacturing department if the rate is calculated using the dual rate method? Variable costs are allocated based on expected monthly usage. Fixed costs are allocated on the basis of practical capacity. Round percentages to two place past the decimal point.

Variable costs allocated based on expected monthly usage:

Cleveland      _______ =             % * $               = $

Akron            

Canton          

Youngstown

Fixed costs allocated based on practical capacity:

Cleveland      _______ =             % * $               = $

Akron            

Canton          

Youngstown

Solution

7)Allocation rate=total costs/practical capacity
=40000/160000=0.25
Cleveland=64000*0.25=16000
Akron=42000*0.25=10500
Canton=28000*0.25=7000
Youngstown=26000*0.25=6500
8)Allocation rate=total costsmonthly usage
=40000/80000=0.5
Cleveland=22000*0.5=11000
Akron=18000*0.5=9000
Canton=20000*0.5=10000
Youngstown=20000*0.5=10000

9)for expected usage uses variable costs and for practical capacity use fixed costs
allocation for expected monthly=16000/80000=0.2
Allocation for practical capacity=24000/160000=0.15
Cleveland=(64000*0.15)+(22000*0.2)=14000
Akron=(42000*0.15)+(18000*0.2)=9900
Canton=(28000*0.15)+(20000*0.2)=8200
Youngstown=(26000*0.15)+(20000*0.2)=7900