Gandolf Corporation Allocates Administrative Costs on the Basis of Staff

question 64

Multiple Choice

Gandolf Corporation allocates administrative costs on the basis of staff hours. Short-run monthly usage and anticipated long-run monthly usage of staff hours for Operating Departments 1 and 2 follow. $$\begin{array} { l l l l } & \underline {\text { Dept. 1 }} & \underline {\text { Dept. 2 }} & \underline { \text { Total } } \\\text { Short-run usage (hours) } & 40,000 & 60,000 & 100,000 \\\text { Long-run usage (hours) } & 45,000 & 55,000 & 100,000\end{array}$$ If Gandolf uses dual-cost accounting procedures and variable administrative costs total $200,000, the amount of variable administrative cost to allocate to Department 1 would be:

• A) $80,000.
• B) $85,000.
• C) $90,000.
• D) $100,000.
• E) None of the other answers are correct.

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