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

question 67

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: Capacity Provided Capacity Used
Department in Hours in Hours
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
Fixed Variable

• 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:

Average Costs

The total costs divided by the number of goods produced, used to calculate the per-unit cost of production.

Incremental Manufacturing Cost

The additional costs incurred when increasing production by one unit.

Production Increase

The rise in the quantity of goods produced by a company or economy over a specific time period.

Direct Manufacturing Cost

Expenses directly related to the production of goods, including raw materials and labor directly involved in manufacturing.