A Company Incurred $80,000 of Common Fixed Costs and $120,000

question 6

Multiple Choice

A company incurred $80,000 of common fixed costs and $120,000 of common variable costs. These costs are to be allocated to Departments A and B. Data on capacity provided and capacity used are as follows: Assume that both fixed and variable costs are allocated on the basis of capacity used. The fixed and variable costs allocated to Department A are

• A) $40,000 $60,000
• B) $50,000 $60,000
• C) $40,000 $75,000
• D) $50,000 $75,000

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Definitions:

Avoidable Cost

Expenses that can be eliminated if a particular decision or action is not pursued.

Special Order

A special order is an order for goods or services that is outside the company's normal scope of operations or production schedule, often requiring special pricing or terms.

Minimum Selling Price

The lowest price at which a product can be sold to cover its production costs without making a loss.

Constrained Resource

A limited resource that restricts a company's ability to produce goods, deliver services, or achieve its objectives.