Stretchmore, Inc has two product divisions: Rubber Bands and Bungee Cords. The Rubber
Band Division products budgets an average sales price of $4 and budgets variable costs of $2 per
unit.
The Bungee Cord Division budgets an average sales price of $50 and budgets variable
costs of $12 per unit. Both divisions use the Accounting Department, which incurs monthly
shared cost of $10,000. Data for the month of July follows:
Divisions
Rubber Band
Division
Bungee Cord
Division
Budgeted Number of Units Sold 12,000 2,000
Actual Number of Units Sold 10,000 1,900
Actual Average Sales price per unit $5.00 $45.00
Actual Average Variable cost per unit $2.80 $11.00
Budgeted Shared Accounting Costs $5,000 $5,000
Actual Reports Requested from Accounting 300 200
If Stretchmore uses number of reports as the allocation cost base, how much accounting costs
would be allocated to the Rubber Band Division?
A) $1,500 B) $4,000 C) $6,000 D) $2,400
C
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Indicate whether the statement is true or false