If a single-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Flashlight Division

ACCOUNTING

Multiple Choice

The Borders 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 2,000 to 3,000 hours:

Fixed operating costs per year $900,000

Variable operating costs $1,200 per hour

Budgeted long-run usage per year:

Flashlight Division 2,000 hours

Night Light Division 500 hours

Practical capacity 3,000 hours

Assume that practical capacity is used to calculate the allocation rates.

Actual usage for the year by the Flashlight Division was 1,400 hours and by the Night Light Division was 600 hours.

If a single-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Flashlight Division?

a. $3,000,000

b. $3,120,000

c. $2,280,000

d. $2,820,000

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