Premium Candy Inc. is a producer of premium chocolate based in Palo Alto. For 2017, the trucking fleet had a practical capacity of 85 round-trips between the Palo Alto plant and the two suppliers. It recorded the following information: Premium Candy Inc. decides to examine the effect of using the dual-rate method for allocating truck costs to each round-trip. Read the requirements4. Requirement 1. Using the dual-rate method, what are the costs allocated to the dark chocolate division and the milk chocolate division when (a) variable costs are allocated using the budgeted rate per round-trip and actual round-trips used by each division and when (b) fixed costs are allocated based on the budgeted rate per round-trip and round-trips budgeted for each division? Dark chocolate Milk chocolate Variable costs Fixed costs Total costs Requirement 2. From the viewpoint of the dark chocolate division, what are the effects of using the dual-rate method rather than the single-rate method? The dual rate (1) how the fixed indirect cost component is treated. By using budgeted trips made, the dark chocolate division is (2) by changes from its own budgeted usage or that of other divisions. When budgeted rates and actual trips are used for allocation, the dark chocolate division is assigned(3) amount for fixed costs as under the dual-rate method because it made(4) number of trips as budgeted. 1: More Info The company has a separate division for each of its two products: dark chocolate and milk chocolate. Premium Candypurchases ingredients from Wisconsin for its dark chocolate division and from Louisiana for its milk chocolate division. Both locations are the same distance from Premium Candy's Palo Alto plant. Premium Candy Inc. operates a fleet of trucks as a cost center that charges the divisions for variable costs (drivers and fuel) and fixed costs (vehicle depreciation, insurance, and registration fees) of operating the fleet. Each division is evaluated on the basis of its operating income. 2: Data Table Budgeted Actual Costs of truck fleet $204,000 $156,000 Number of round-trips for dark chocolate division (Palo Alto plant - Wisconsin) 45 45 Number of round-trips for milk chocolate division (Palo Alto plant - Louisiana) 40 35 3: Data Table At the start of 2017, the budgeted costs were: Variable cost per round-trip $1,550 Fixed costs $72,250 The actual results for the 80 round-trips made in 2017 were: Variable cost $60,000 Fixed costs 96,000 Total $156,000 4: Requirements 1. Using the dual-rate method, what are the costs allocated to the dark chocolate division and the milk chocolate division when (a) variable costs are allocated using the budgeted rate per round-trip and actual round-trips used by each division and when (b) fixed costs are allocated based on the budgeted rate per round-trip and round-trips budgeted for each division? 2. From the viewpoint of the dark chocolate division, what are the effects of using the dual-rate method rather than the single-rate method? Single-rate method data: Total costs Rate per round-trip Costs allocated by Dark chocolate Milk chocolate Budgeted Budgeted round-trips $108,000 $96,000 Budgeted Actual round-trips used 108,000 84,000 Actual Actual round-trips used 87,750 68,250

Premium Candy Inc. is a producer of premium chocolate based in Palo Alto. For 2017, the trucking fleet had a practical capacity of 85 round-trips between the Palo Alto plant and the two suppliers. It recorded the following information: Premium Candy Inc. decides to examine the effect of using the dual-rate method for allocating truck costs to each round-trip. Read the requirements4. Requirement 1. Using the dual-rate method, what are the costs allocated to the dark chocolate division and the milk chocolate division when (a) variable costs are allocated using the budgeted rate per round-trip and actual round-trips used by each division and when (b) fixed costs are allocated based on the budgeted rate per round-trip and round-trips budgeted for each division? Dark chocolate Milk chocolate Variable costs Fixed costs Total costs Requirement 2. From the viewpoint of the dark chocolate division, what are the effects of using the dual-rate method rather than the single-rate method? The dual rate (1) how the fixed indirect cost component is treated. By using budgeted trips made, the dark chocolate division is (2) by changes from its own budgeted usage or that of other divisions. When budgeted rates and actual trips are used for allocation, the dark chocolate division is assigned(3) amount for fixed costs as under the dual-rate method because it made(4) number of trips as budgeted. 1: More Info The company has a separate division for each of its two products: dark chocolate and milk chocolate. Premium Candypurchases ingredients from Wisconsin for its dark chocolate division and from Louisiana for its milk chocolate division. Both locations are the same distance from Premium Candy's Palo Alto plant. Premium Candy Inc. operates a fleet of trucks as a cost center that charges the divisions for variable costs (drivers and fuel) and fixed costs (vehicle depreciation, insurance, and registration fees) of operating the fleet. Each division is evaluated on the basis of its operating income. 2: Data Table Budgeted Actual Costs of truck fleet $204,000 $156,000 Number of round-trips for dark chocolate division (Palo Alto plant - Wisconsin) 45 45 Number of round-trips for milk chocolate division (Palo Alto plant - Louisiana) 40 35 3: Data Table At the start of 2017, the budgeted costs were: Variable cost per round-trip $1,550 Fixed costs $72,250 The actual results for the 80 round-trips made in 2017 were: Variable cost $60,000 Fixed costs 96,000 Total $156,000 4: Requirements 1. Using the dual-rate method, what are the costs allocated to the dark chocolate division and the milk chocolate division when (a) variable costs are allocated using the budgeted rate per round-trip and actual round-trips used by each division and when (b) fixed costs are allocated based on the budgeted rate per round-trip and round-trips budgeted for each division? 2. From the viewpoint of the dark chocolate division, what are the effects of using the dual-rate method rather than the single-rate method? Single-rate method data: Total costs Rate per round-trip Costs allocated by Dark chocolate Milk chocolate Budgeted Budgeted round-trips $108,000 $96,000 Budgeted Actual round-trips used 108,000 84,000 Actual Actual round-trips used 87,750 68,250

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Premium Candy Inc. is a producer of premium chocolate based in Palo Alto.

For 2017, the trucking fleet had a practical capacity of 85 round-trips between the Palo Alto plant and the two suppliers. It recorded the following information:

Premium Candy Inc. decides to examine the effect of using the dual-rate method for allocating truck costs to each round-trip.

Read the requirements4.

Requirement 1. Using the dual-rate method, what are the costs allocated to the dark chocolate division and the milk chocolate division when (a) variable costs are allocated using the budgeted rate per round-trip and actual round-trips used by each division and when (b) fixed costs are allocated based on the budgeted rate per round-trip and round-trips budgeted for each division?

	Dark chocolate	Milk chocolate
Variable costs
Fixed costs
Total costs

Requirement 2. From the viewpoint of the dark chocolate division, what are the effects of using the dual-rate method rather than the single-rate method?

The dual rate (1) how the fixed indirect cost component is treated. By using budgeted trips made, the dark chocolate division is

(2) by changes from its own budgeted usage or that of other divisions. When budgeted rates and actual trips are used for allocation, the dark chocolate division is assigned(3) amount for fixed costs as under the dual-rate method because it made(4) number of trips as budgeted.

1: More Info

The company has a separate division for each of its two products: dark chocolate and milk chocolate. Premium Candypurchases ingredients from Wisconsin for its dark chocolate division and from Louisiana for its milk chocolate division. Both locations are the same distance from Premium Candy's Palo Alto plant. Premium Candy Inc. operates a fleet of trucks as a cost center that charges the divisions for variable costs (drivers and fuel) and fixed costs (vehicle depreciation, insurance, and registration fees) of operating the fleet. Each division is evaluated on the basis of its operating income.

2: Data Table

	Budgeted	Actual
Costs of truck fleet	$204,000	$156,000
Number of round-trips for dark chocolate division (Palo Alto plant - Wisconsin)	45	45
Number of round-trips for milk chocolate division (Palo Alto plant - Louisiana)	40	35

3: Data Table

At the start of 2017, the budgeted costs were:

Variable cost per round-trip	$1,550
Fixed costs	$72,250

The actual results for the 80 round-trips made in 2017 were:

Variable cost	$60,000
Fixed costs	96,000
Total	$156,000

4: Requirements

1.	Using the dual-rate method, what are the costs allocated to the dark chocolate division and the milk chocolate division when (a) variable costs are allocated using the budgeted rate per round-trip and actual round-trips used by each division and when (b) fixed costs are allocated based on the budgeted rate per round-trip and round-trips budgeted for each division?
2.	From the viewpoint of the dark chocolate division, what are the effects of using the dual-rate method rather than the single-rate method?

Single-rate method data:

		Total costs
Rate per round-trip	Costs allocated by	Dark chocolate	Milk chocolate
Budgeted	Budgeted round-trips	$108,000	$96,000
Budgeted	Actual round-trips used	108,000	84,000
Actual	Actual round-trips used	87,750	68,250

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