Adam and Duke Law, LLC has two divisions: family law and estate planning. When t

Question

Adam and Duke Law, LLC has two divisions: family law and estate planning. When the specifications for the new computer system were established, the family law division needed 45% of the capacity and the estate planning division needed 55%. The fixed computer department costs are allocated based on computer needs. The variable costs of the computer department are allocated based on the minutes of computer time that each department uses. The computer division budgeted $375,000 for fixed cost, and the budget for variable costs is $245,800. The company anticipates using 475,000 minutes of computer time. What amount of the computer department’s fixed costs will be allocated to each division?

Explanation / Answer

Ans:

The computer department's fixed cost will be allocated to each division based on computer nneeds

So

Family law needed 45% capacity and

Estate planning needed 55%

So the fixed cost allocated for

Family law is

$375,000*45% =$168,750

Estate planning is

$375,000*55% = $206,250

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