North Carolina Airlines uses a centralized computer system for use in reservatio

Question

North Carolina Airlines uses a centralized computer system for use in reservations, scheduling flights and personnel, maintenance schedules, and accounting. Costs of using the computer are charged to individual departments based upon time used. The company is contemplating the use of a dual allocation rate rather than the single allocation rate that it currently uses. The following information is available tor estimated usage of computer resources for the upcoming fiscal quarter. The costs of operating the computer system are estimated to be as follows: $3,750,000 for costs related to processing and $1,400,000 for costs related to storage capacity. Allocate the costs of the computer system to the various departments using a single rate with processing time used as the allocation base. Round your rate to four decimal places and all other dollar amounts to the nearest whole dollar. Allocate the costs of the computer system to the various departments using a dual rate, with costs related to processing allocated using processing time used as the allocation base and costs related to storage capacity allocated using storage capacity used as the allocation base. Round your rates to four decimal places and all other dollar amounts to the nearest whole dollar.

Explanation / Answer

2. Statement of Cost Pool Amount Basis Total Time Rate Processing Time 3750000 Processing Time 3200+1800+7200+2800 = 15000 3750000/15000 = 250 Amount Basis Total Time Rate Storage Capacity 1400000 Storage Capacity 1250+750+250+550 = 2800 1400000/2800 = 500 Statement of Cost Department Processing Time Capacity * RATE Cost Storage Capacity Capacity * RATE Cost Reservations 3200 3200*250 800000 1250 1250*500 625000 Scheduling 1800 1800*250 450000 750 750*500 375000 Maintenance 7200 7200*250 1800000 250 250*500 125000 Accounting 2800 2800*250 700000 550 550*500 275000 3750000 1400000

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