Question

The law firm of Barnes & Cohen purchased a new $17,600 copier. Copying costs will be shared by the purchasing, accounting, and information technology departments since those are the only departments that will have access to the machine. The company has decided to allocate the copying cost based on the number of copies made by each department. The sales person who sold the copier to the attorneys expects it will generate 1,000,000 copies. The manager of each department has estimated the number of copies that his or her department will make over the life of the copier:
Department CopiesPurchasing 150,000Accounting 450,000Information Technology 200,000How much overhead will be allocated each time a copy is made by the accounting department?A) 2.2 centsB) 3.9 centsC) 1.76 centsD) None of the above

Answer 1

Answer:

A. 2.2 cents

Explanation:

The computation of cost per copy for accounting department is shown below:-

Total copies = Purchase + Accounting + Information technology

= $150,000 + $450,000 + $200,000

= $800,000

Cost for accounting department = Accounting ÷ Total copies × New copier

= $450,000 ÷ $800,000 × $17,600

= $9,900

Now, Cost per copy = Cost for accounting department ÷ Accounting

= $9,900 ÷ $450,000

= 2.2 cents