158.
159.
160.
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161.
The fixed costs of operating the maintenance facility of Indian River Hospital are
$4,500,000 annually. Variable costs are incurred at the rate of $30 per maintenance-hour.
The facility averages 40,000 maintenance-hours a year. Budgeted and actual hours per
user for 20X3 are as follows:
Budgeted
hours
Actual
hours
Building and grounds
10,000
12,000
Operating and
emergency
8,000
8,000
Patient care
21,000
22,000
Administration
1,000
1,200
Total
40,000
43,200
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162.
The Michael Vamosi Corporation operates one central plant that has two divisions, the
Lamp Division and the Flashlight Division. The following data apply to the coming budget
year:
Budgeted costs of the
operating the plant
for 10,000 to 20,000 hours:
Fixed operating costs per
year
$240,000
Variable operating costs
$10
per hour
Practical capacity
20,000
hours per
year
Budgeted long-run
usage per year:
Lamp Division
800 hours ×
12 months =
9,600
hours
per year
Flashlight Division
450 hours ×
12 months =
5,400
hours
per year
Assume that practical capacity is used to calculate the allocation rates. Further assume
that actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400
hours for the month of June.
Required:
a. If a single-rate cost-allocation method is used, what amount of operating costs will be
budgeted for the Lamp Division each month? For the Flashlight Division each month?
b. For the month of June, if a single-rate cost-allocation method is used, what amount of
cost will be allocated to the Lamp Division? To the Flashlight Division? Assume actual
usage is used to allocate operating costs.
c. If a dual-rate cost-allocation method is used, what amount of operating costs will be
budgeted for the Lamp Division each month? For the Flashlight Division each month?
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