Mesa Telcom Has Three Divisions, Commercial, Retail, and Consumer, That

question 150

Multiple Choice

Mesa Telcom has three divisions, commercial, retail, and consumer, that share the common costs of the company's computer server network. The annual common costs are $2,400,000. You have been provided with the following information for the upcoming year:
$$\begin{array} { | l | r | r | } \hline & \text { Connections } & { \text { Time on Network (hours) } } \\\hline \text { Commercial } & 60,000 & 120,000 \\\hline \text { Retail } & 80,000 & 150,000 \\\hline \text { Consumer } & 100,000 & 330,000 \\\hline\end{array}$$
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The cost accountant determined $1,700,000 of the server network's costs were fixed and should be allocated based on the number of connections. The remaining costs should be allocated based on the time on the network. What is the total server network costs allocated to the Commercial Division, assuming the company uses dual-rates to allocate common costs?

• A) $514,286.
• B) $480,000.
• C) $600,000.
• D) $565,000.

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Definitions:

Consumption

The use of goods and services by households. It includes expenditures on goods and services, except for purchases of new housing.

Depreciation

The process by which physical assets lose value over time due to wear, tear, or obsolescence, affecting their monetary worth on financial statements.

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate representation of an economy's size and how it's grown over time.

Economic Welfare

A broad measure that evaluates the standard of living and overall well-being of people within an economy.