Biotechtron, Inc., has two research laboratories in the Southwest, one in Yuma, Arizona, and theother in Bernalillo, New Mexico. The owner of Biotechtron centralized the legal services functionin the Yuma office and had both laboratories send any legal questions or issues to the Yuma office. The legal services support center has budgeted fixed costs of $160,000 per year and a budg-eted variable rate of $65 per hour of professional time. The normal usage of the legal services cen-ter is 2,600 hours per year for the Yuma office and 1,400 hours per year for the Bernalillo office. This corresponds to the expected usage for the coming year.Required:1. Determine the amount of legal services support center costs that should be assigned to eachoffice. 2. Since the offices produce services, not tangible products, what purpose is served by allocat-ing the budgeted costs? 3. Now, assume that during the year, the legal services center incurred actual fixed costs of$163,000 and actual variable costs of $272,400. It delivered 4,180 hours of professional time—2,580 hours to Yuma and 1,600 hours to Bernalillo. Determine the amount of thelegal services center’s costs that should be allocated to each office. Explain the purposes ofthis allocation.4. Did the costs allocated differ from the costs incurred by the legal services center? If so, why?
Biotechtron, Inc., has two research laboratories in the Southwest, one in Yuma, Arizona, and the
other in Bernalillo, New Mexico. The owner of Biotechtron centralized the legal services function
in the Yuma office and had both laboratories send any legal questions or issues to the Yuma
office. The legal services support center has budgeted fixed costs of $160,000 per year and a budg-
eted variable rate of $65 per hour of professional time. The normal usage of the legal services cen-
ter is 2,600 hours per year for the Yuma office and 1,400 hours per year for the Bernalillo office.
This corresponds to the expected usage for the coming year.
Required:
1. Determine the amount of legal services support center costs that should be assigned to each
office.
2. Since the offices produce services, not tangible products, what purpose is served by allocat-
ing the budgeted costs?
3. Now, assume that during the year, the legal services center incurred actual fixed costs of
$163,000 and actual variable costs of $272,400. It delivered 4,180 hours of professional time—2,580 hours to Yuma and 1,600 hours to Bernalillo. Determine the amount of the
legal services center’s costs that should be allocated to each office. Explain the purposes of
this allocation.
4. Did the costs allocated differ from the costs incurred by the legal services center? If so, why?
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