16.2.3: Fixed-Cost Allocation Based on Budgeted Rates and Budgeted Usage

Fixed-Cost Allocation Based on Budgeted Rates and Budgeted Usage

When budgeted usage is the allocation base, regardless of the actual usage of facilities (i.e., whether Case 1, 2, or 3 occurs), user departments receive a preset lump-sum fixed-cost charge as in the dual-rate procedure discussed earlier. If rates are calculated based on budgeted usage at $40 per hour $begin inline style left parenthesis $ text 144,000 end text divided by text 3,600?hours), end text end style$ the Machining Department is assigned $begin inline style text $ end text 32 text , end text 000 text ? end text left parenthesis text $ end text 40 text ?per?hour end text cross times 800 text ?hours end text right parenthesis end style$ and the Assembly Department, $begin inline style text $ end text 112 text , end text 000 text ? end text left parenthesis text $ end text 40 text ?per?hour end text thin space cross times thin space 2 comma back space 800 text ?hours end text right parenthesis end style$ . If rates are set using practical capacity at $36 per hour $begin inline style left parenthesis text $ end text 144 text , end text 000 divided by 4 text , end text 000 text ?hours), end text end style$ the Machining Department is charged $begin inline style text $28,800 end text thin space left parenthesis straight $ 36 text ?per?hour end text cross times 800 text ?hours), end text end style$ the Assembly Department is allocated $inline style begin inline style text $ end text 100 text , end text 800 text ? end text left parenthesis straight $ 36 text ?per?hour end text cross times text 2,800?hours) end text comma end style$ and the remaining $begin inline style text $ end text 14 text , end text 400 end style$ $begin inline style left parenthesis text $ end text 36 text ?per?hour end text cross times 400 text ?hours end text right parenthesis end style$ is the unallocated cost of excess capacity.