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We Be Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable...

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Accounting

We Be Warehouse Fitness Equipment incurred $80,000 of commonfixed costs and $120,000 of common variable costs. Data areprovided below for the capacity allowed and the capacityused.

DepartmentCapacity
Provided in Hours		Capacity
Used in Hours
Barbell Department500400
Sauna Department300400

For both departments, common fixed costs are to be allocated onthe basis of capacity provided and common variable costs are to beallocated on the basis of capacity used.

The fixed and variable costs allocated to the SaunaDepartment are:

a) $30,000 and $60,000 respectively

b) $50,000 and $60,000, respectively.

c) $50,000 and $75,000, respectively.

d) $30,000 and $50,000, respectively.

e) $30,000 and $75,000, respectively.

Answer & Explanation Solved by verified expert
4.2 Ratings (468 Votes)

Correct answer is: a) $30000 and $60000, respectively
Workings:
Department Common Fixed cost Common Variable cost
Barbell $                           50,000 $                               60,000
Sauna $                           30,000 $                               60,000
Department Capacity provided Weight Common Fixed cost
(a) (b) = (a)/800 $80000 X (b)
Barbell 500 62.50% $                            50,000
Sauna 300 37.50% $                            30,000
Total 800 $                            80,000
Department Capacity used Weight Common Variable cost
(a) (b) = (a)/800 $120000 X (b)
Barbell 400 50% $                            60,000
Sauna 400 50% $                            60,000
Total 800 $                         1,20,000

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