A company incurred £30,000 of common fixed costs and £40,000 of common variable

Question

A company incurred £30,000 of common fixed costs and £40,000 of common variable costs. These costs are to be allocated to Departments X and Y. Data on capacity provided and capacity used are as follows: Capacity Provided (in Hours) X-100, Y-300; Capacity Used (in Hours) X-100, Y-300. Assume that common fixed costs are to be allocated to Departments X and Y on the basis of capacity provided and that common variable costs are to be allocated to Departments X and Y on the basis of capacity used. The fixed and variable costs allocated to Department X are Select one: a. FC-£15,000; VC-£7,500 b. FC-£7,500; VC-£10,000 c. cannot be determined d. FC-£10,000; VC-£17,500 e. FC-£17,500; VC-£15,000

A company incurs prime cost of $50000 and 4000 machine hours for producing product. $20000 is the budgeted overhead for the production. If the company uses overhead rate of $2 per machine hour, Company’s overhead applied to product are

Select one:

a. Cannot be determined

b. $8000

c. $50000

d. $58000

e. $42000

Explanation / Answer

1 Fixed costs allocated 7500 Variable costs allocated 10000 Total costs allocated 17500 Option B is correct 2 Company’s overhead applied to product = 4000*2 = 8000 Option B is correct

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