70.2K

Verified Solution

Link Copied!

Beauty Body Inc. has a new promotional program that offers a free gift$-$wrapping service for its customers. Beauty's customer$-$service division has Beauty Body Inc. has a new promotional program that offers a free gift$-$wrapping service for its customers. Beauty's customer$-$service division has

practical capacity to wrap $7,500$ gifts at a budgeted fixed cost of $$6,600$ each month. The budgeted variable cost to gift wrap an item is $$0\mathrm{.}40.$

Although the service is free to customers, a gift$-$wrapping service cost allocation is made to the division where the item was purchased.

The customer$-$service division reported the following for the most recent month:

riew the actual.budgeted. and practical canacity units

Read the requirements.

Requirement $1.$ Using the single$-$rate method, allocate gift$-$wrapping costs to different divisions in these three ways:

a$.$ Calculate the budgeted rate based on the budgeted number of gifts to be wrapped and allocate costs based on the budgeted use $($of gift$-$

wrapping services$).$

b$.$ Calculate the budgeted rate based on the budgeted number of gifts to be wrapped and allocate costs based on actual usage.

c$.$ Calculate the budgeted rate based on the practical gift$-$wrapping capacity available and allocate costs based on actual usage.

Start with allocating $($a$),$ then $($b$),$ and finally $($c$).($Round all of your answers to the nearest cent.$)$

$($a$)$

Budgeted rate per item:

Women's face wash

Men's face wash

Fragrances

Body wash

$($b$)$

$($c$)$

practical capacity to wrap $7,500$ gifts at a budgeted fixed cost of $$6,600$ each month. The budgeted variable cost to gift wrap an item is $$0\mathrm{.}40.$

Although the service is free to customers, a gift$-$wrapping service cost allocation is made to the division where the item was purchased.

Question $15-1$

The customer$-$service division reported the following for the most recent month:

Required

Using the single$-$rate method, allocate gift$-$wrapping costs to different

divisions in these three ways:

a$.$ Calculate the budgeted rate based on the budgeted number of gifts

to be wrapped and allocate costs based on the budgeted use $($of gift$-$

wrapping services$).$

b$.$ Calculate the budgeted rate based on the budgeted number of gifts

to be wrapped and allocate costs based on actual usage.

c$.$ Calculate the budgeted rate based on the practical gift$-$wrapping

capacity available and allocate costs based on actual usage.

Using the dual$-$rate method, compute the amount allocated to each

department when $($a$)$ the fixed$-$cost rate is calculated using budgeted costs

and the practical gift$-$wrapping capacity, $($b$)$ fixed costs are allocated based

on budgeted usage of gift$-$wrapping services, and $($c$)$ variable costs are

allocated using the budgeted variable$-$cost rate and actual usage.

Comment on your results in requirements $1$ and $2.$ Discuss the advantages

of the dual$-$rate method.

Actual, Budgeted, and Practical Capacity Units

Show all imagesShow all images

Answer & Explanation Solved by verified expert

See Answer