Required: 1. Using the single-rate method, allocate costs to the dark chocolate division and the milk chocolate division in these three ways. a. Calculate the budgeted rate per round-trip and allocate costs based on round-trips budgeted for each division. b. Calculate the budgeted rate per round-trip and allocate costs based on actual round-trips used by each division. c. Calculate the actual rate per round-trip and allocate costs based on actual round-trips used by each division. Question 1 Yummy Inc. is a producer of premium chocolate based in Palo Alto. The company has a separate division for each of its two products: dark chocolate and milk chocolate. The company purchases ingredients from Wisconsin for its dark chocolate division and from Louisiana for its milk chocolate division. Both locations are the same distance from the company's Palo Alto plant. Yummy 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. For 2012, the trucking fleet had a practical capacity of 50 round-trips between the Palo Alto plant and the two suppliers. It recorded the following information: 2. Describe the advantages and disadvantages of using each of the three methods in requirement 1. 3. Would you encourage Yummy Inc. to use one of these methods? Explain and indicate any assumptions you made. Budgeted $115,000 Costs of truck fleet Number of round-trips for dark chocolate 30 division (Palo Alto plant-Wisconsin) Number of round-trips for milk chocolate 20 division (Palo Alto plant-Louisiana) Actual $96,750 30 15
Required: 1. Using the single-rate method, allocate costs to the dark chocolate division and the milk chocolate division in these three ways. a. Calculate the budgeted rate per round-trip and allocate costs based on round-trips budgeted for each division. b. Calculate the budgeted rate per round-trip and allocate costs based on actual round-trips used by each division. c. Calculate the actual rate per round-trip and allocate costs based on actual round-trips used by each division. Question 1 Yummy Inc. is a producer of premium chocolate based in Palo Alto. The company has a separate division for each of its two products: dark chocolate and milk chocolate. The company purchases ingredients from Wisconsin for its dark chocolate division and from Louisiana for its milk chocolate division. Both locations are the same distance from the company's Palo Alto plant. Yummy 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. For 2012, the trucking fleet had a practical capacity of 50 round-trips between the Palo Alto plant and the two suppliers. It recorded the following information: 2. Describe the advantages and disadvantages of using each of the three methods in requirement 1. 3. Would you encourage Yummy Inc. to use one of these methods? Explain and indicate any assumptions you made. Budgeted $115,000 Costs of truck fleet Number of round-trips for dark chocolate 30 division (Palo Alto plant-Wisconsin) Number of round-trips for milk chocolate 20 division (Palo Alto plant-Louisiana) Actual $96,750 30 15
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Required:
1. Using the single-rate method, allocate costs to the dark chocolate division and the
milk chocolate division in these three ways.
a. Calculate the budgeted rate per round-trip and allocate costs based on round-trips
budgeted for each division.
b. Calculate the budgeted rate per round-trip and allocate costs based on actual
round-trips used by each division.
c. Calculate the actual rate per round-trip and allocate costs based on actual round-trips
used by each division.
Question 1
Yummy Inc. is a producer of premium chocolate based in Palo Alto. The company has a
separate division for each of its two products: dark chocolate and milk chocolate. The
company purchases ingredients from Wisconsin for its dark chocolate division and from
Louisiana for its milk chocolate division. Both locations are the same distance from the
company's Palo Alto plant.
Yummy 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. For
2012, the trucking fleet had a practical capacity of 50 round-trips between the Palo Alto plant
and the two suppliers. It recorded the following information:
2. Describe the advantages and disadvantages of using each of the three methods in
requirement 1.
3. Would you encourage Yummy Inc. to use one of these methods? Explain and indicate
any assumptions you made.
Budgeted
$115,000
Costs of truck fleet
Number of round-trips for dark chocolate 30
division (Palo Alto plant-Wisconsin)
Number of round-trips for milk chocolate 20
division (Palo Alto plant-Louisiana)
Actual
$96,750
30
15
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