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BASIC ALLOCATION 1. Sweeper Company produces brooms. Utility costs are allocated to products based on a percentage of material costs. Utility costs of $15,000 per month are budgeted and the store anticipates spending $30,000 in materials. If the company spends $8.50 per broom for materials, how much of the utility costs will be allocated to each broom? A. $4.25 B. $2.00 C. $17.00 D. $8.50
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BASIC ALLOCATION 2. Tyler’s Consulting Company has purchased a new $15,000 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those are the only departments which will be able to access the machine. The company has decided to allocate the cost based on the number of copies made by each department. The copier is estimated to provide 1 million copies over its life. Each division has estimated the number of copies which will be made over the life of the copier. Purchasing 350,000 Accounting 200,000 Information Tech 425,000 Note: Cost allocations are computed to 4 significant digits. Resulting values are
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