The Document Creation Center (DCC) for Arlington Corp -
If DCC Uses a Dual-

question 157

Multiple Choice

The Document Creation Center (DCC) for Arlington Corp. provides photocopying and document services for three departments in the Minneapolis office. The following budget has been prepared for the year.
$\begin{array}{lr}\text { Available capacity } & 8,000,000 \text { pages } \\\text { Budgeted usage: } & \\\text { Software Development } & 1,600,00 \text { pages } \\\text { Training } & 3,000,00 \text { pages } \\\text { Management } & 2,400,000 \text { pages } \\\text { Cost equation } & \$ 280,000+\$ 0.03 \text { per page }\end{array}$

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If DCC uses a dual-.rate for allocating its costs based on usage, how much cost will be allocated to the Software Development Department?

• A) $98,000.
• B) $104,000.
• C) $112,000.
• D) $118,857.

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Definitions:

Total Fixed Costs

The sum of all costs that remain constant regardless of any change in a company's production volume.

Diminishing Returns

A principle stating that if one input in the production of a commodity is increased while other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out.

Average Variable Costs

represent the variable costs (costs that change with output level) per unit of output, calculated by dividing the total variable costs by the quantity of output produced.