Triton Company\'s copy department, which does almost all of the photocopying for
ID: 2643301 • Letter: T
Question
Triton Company's copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity of copies:
Salaries (fixed)
$85,500
Employee benefits (fixed)
10,000
Depreciation of copy machines (fixed)
10,000
Utilities (fixed)
5,000
Paper (variable, 1 cent per copy)
50,000
Toner (variable, 1 cent per copy)
50,000
The costs are assigned to two cost pools, one for fixed and one for variable costs. The costs are then assigned to the sales department and the administrative department. Fixed costs are assigned on a lump-sum basis, 40 percent to sales and 60 percent to administration. The variable costs are assigned at a rate of 2 cents per copy.
Assuming the following copies were made during the year, 2,503,750 for sales and 3,278,250 for administration, calculate the copy department costs allocated to sales.
Explanation / Answer
Copy department cost allocated to sales would comprise of 40% of total fixed costs and variable costs at 2% of copies done for sales department. The formula would be:
Total Copy Department Costs = (Fixed Cost) + (Variable Cost)
Fixed Cost Allocated to Sales Department = (Salaries + Employee Benefits + Depreciation + Utilities)*40%
Variable Cost = Number of Copies for Sales Department*Variable Cost Per Copy
___________________
Solution:
Step 1: Calculate Fixed Cost Allocated to Sales Department:
Fixed Cost = (85,500 + 10,000 + 10,000 + 5,000)*40% = $44,200
___________________
Step 2: Calculate Variable Cost Allocated to Sales Department:
Variable Cost = 2,503,750*.02 = $50,075
___________________
Step 3: Calculate Total Cost Allocated to Sales Department:
Total Cost = $44,200 + $50,075 = $94,275
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