The Rapid Recycling Inc

The Rapid Recycling Inc.operates one central plant that has two divisions, the Residential Division and the Commercial Division.The following data apply to the coming budget year:
Budgeted costs of the operating the plant
for 4,000 to 8,000 hours:
Budgeted long-run usage per year:
Assume that practical capacity is used to calculate the allocation rates.Further assume that actual usage of the Residential Division was 410 hours and the Commercial Division was 190 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 Residential Division each month? For the Commercial 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 Residential Division? To the Commercial 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 Residential Division each month? For the Commercial Division each month?
d.For the month of June, if a dual-rate cost allocation method is used, what amount of cost will be allocated to the Residential Division? To the Commercial Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

Correct Answer:

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a.Fixed costs $252,000/7,200 p...

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