Barrington Box Enterprises Has Two Divisions,large and Small,that Share the Common

question 70

Multiple Choice

Barrington Box Enterprises has two divisions,large and small,that share the common costs of the company's communications network.The annual common costs are $4,500,000.You have been provided with the following information for the upcoming year:
$$\begin{array} { | l | r | r | } \hline & \text { Calls } & \begin{array} { r } \text { Time on } \\\text { Network (hous) }\end{array} \\\hline \text { Large } & 100,000 & 120,000 \\\hline \text { Small } & 80,000 & 330,000 \\\hline\end{array}$$ The cost accountant determined $2,700,000 of the communication network's costs were fixed and should be allocated based on the number of calls.The remaining costs should be allocated based on the time on the network.What is the total communication network costs allocated to the Large Box Division,assuming the company uses dual-rates to allocate common costs?

• A) $2,700,000.
• B) $2,520,000.
• C) $1,980,000.
• D) $1,500,000.

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Definitions:

External Cost

A cost incurred by a third party who did not agree to the action causing the cost.

Marginal Costs

The additional cost of producing one more unit of a product or service.

External Cost

Costs that are not borne by the individuals or entities responsible for producing or consuming a good or service, often affecting third parties.

Marginal Cost

The increase in total production costs resulting from the production of one additional unit of a product or service.