AC Consulting Company has purchased a new $15,000 copier. This overhead cost wil

Question

AC Consulting Company has purchased a new $15,000 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those are the only departments which will be able to access the machine. The company has decided to allocate the cost based on the number of copies made by each department. The copier is estimated to provide 1 million copies over its life. Each department has estimated the number of copies which will be made in their department over the life of the copier.
Department Copies Purchasing 350,000 Accounting 200,000 Information Tech 400,000
How much overhead will be allocated each time a copy is made if cost allocations are computed to 4 significant digits? Answer                              A. $63.3333                 B. $0.0150                 C. $66.6667                 D. $0.0158 AC Consulting Company has purchased a new $15,000 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those are the only departments which will be able to access the machine. The company has decided to allocate the cost based on the number of copies made by each department. The copier is estimated to provide 1 million copies over its life. Each department has estimated the number of copies which will be made in their department over the life of the copier.
Department Copies Purchasing 350,000 Accounting 200,000 Information Tech 400,000
How much overhead will be allocated each time a copy is made if cost allocations are computed to 4 significant digits? Department Copies Purchasing 350,000 Accounting 200,000 Information Tech 400,000
How much overhead will be allocated each time a copy is made if cost allocations are computed to 4 significant digits? $63.3333 $0.0150 $66.6667 $0.0158 Department Copies Purchasing 350,000 Accounting 200,000 Information Tech 400,000

Explanation / Answer

The cost of the copier is $15,000 for 1m copies, this would means $0.015/ copies. Each dept were asked to estimate how many copies they would make over the life (1m). Based on their own estimate, I would then calculate the total estimated cost that would be bore by each dept. The rate/ copies would then derived from each dept total shared cost/ estimated usage. So, here's what I will do:

Usages Share of Cost Cost/ Copies
P 350,000.0000; 5,384.6154; 0.0154
A 200,000.0000; 3,076.9231; 0.0154
IT 425,000.0000; 6,538.4615; 0.0154

D. $0.0158

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