Aquamarine company incurred $20,000 of common fixed costs and $80,000 of common

Question

Aquamarine company incurred $20,000 of common fixed costs and $80,000 of common variable costs. These costs are to be allocated to its two departments: Department A and Department B. Data on capacity provided and capacity used by the two departments follows: ? Capacity Provided Capacity Used Department in Hours in Hours A 600 550 B 400 450 Common fixed costs are allocated to Departments A and B on the basis of capacity provided, and common variable costs are allocated to Departments A and B on the basis of capacity used. The fixed and variable costs allocated to Department A are: a. $32,000 and $30,500, respectively. b. $10,000 and $50,500, respectively. c. $12,000 and $44,000, respectively. d. $20,000 and $37,000, respectively.

Explanation / Answer

common fixed costs allocated=20000/(600+400)*600= $12000 common variable costs allocated=80000/(550+450)*550= $44000 Option C is correct

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