Mesa Telcom Has Three Divisions,commercial,retail,and Consumer,that Share the Common Costs

question 110

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:
$$\begin{array} { | l | r | r | } \hline & \text { Connections } & \begin{array} { r } \text { Time on } \\\text { Network (hous) }\end{array} \\\hline \text { Commercial } & 60,000 & 120,000 \\\hline \text { Retail } & 80,000 & 150,000 \\\hline \text { Consumer } & 100,000 & 330,000 \\\hline\end{array}$$ 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:

Straight-line Method

A depreciation method where the value of an asset is reduced evenly over its useful life.

Journal Entries

Records of financial transactions in the accounting system, indicating the accounts and amounts to be debited and credited.

Equipment Cost

The purchase price of machinery and tools required for manufacturing or providing services, excluding ongoing operating expenses.

Salvage Value

The calculated sale amount an asset is deemed to achieve after its useful life concludes.