Homework Help is Here – Start Your Trial Now!
Business
Accounting
AirBorne is a small airline operating out of Boise, Idaho. Its three flights travel to Salt Lake City, Reno, and Portland. The owner of the airline wants to assess the full cost of operating each flight. As part of this assessment, the costs of two support departments (maintenance and bag- gage) must be allocated to the three flights. The two support departments that support all three flights are located in Boise (any maintenance or baggage costs at the destination airports are directly traceable to the individual flights). Budgeted and actual data for the year are as follows for the support departments and the three flights: Support Centers Flights Maintenance Baggage Salt Lake City Reno Portland Budgeted data: Fixed overhead $240,000 S150,000 $20,000 $18,000 S30,000 S 30,000 $ 5,000 2,000 Variable overhead S 64,000 S 6,000 $10,000 4,000 Hours of flight time* Number of passengers Actual data: 2,000 10,000 15,000 5,000 S156,000 S 33,000 Fixed overhead $235,000 $ 80,000 $22,000 $17,000 $11,000 S29,500 $ 6,200 1,800 Variable overhead S 5,800 Hours of flight time Number of passengers 4,200 2,500 8,000 16,000 6,000 *Normal sctivity levels. Round all allocation ratios and variable rates to four significant digits. Round all allocated amounts to the nearest dollar. Required: 1. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to determine the cost of operating each flight. 2. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to evaluate performance. Do any costs remain in the two support departments after the allocation? If so, how much? Explain.

AirBorne is a small airline operating out of Boise, Idaho. Its three flights travel to Salt Lake City, Reno, and Portland. The owner of the airline wants to assess the full cost of operating each flight. As part of this assessment, the costs of two support departments (maintenance and bag- gage) must be allocated to the three flights. The two support departments that support all three flights are located in Boise (any maintenance or baggage costs at the destination airports are directly traceable to the individual flights). Budgeted and actual data for the year are as follows for the support departments and the three flights: Support Centers Flights Maintenance Baggage Salt Lake City Reno Portland Budgeted data: Fixed overhead $240,000 S150,000 $20,000 $18,000 S30,000 S 30,000 $ 5,000 2,000 Variable overhead S 64,000 S 6,000 $10,000 4,000 Hours of flight time* Number of passengers Actual data: 2,000 10,000 15,000 5,000 S156,000 S 33,000 Fixed overhead $235,000 $ 80,000 $22,000 $17,000 $11,000 S29,500 $ 6,200 1,800 Variable overhead S 5,800 Hours of flight time Number of passengers 4,200 2,500 8,000 16,000 6,000 *Normal sctivity levels. Round all allocation ratios and variable rates to four significant digits. Round all allocated amounts to the nearest dollar. Required: 1. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to determine the cost of operating each flight. 2. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to evaluate performance. Do any costs remain in the two support departments after the allocation? If so, how much? Explain.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 34P: AirBorne is a small airline operating out of Boise, Idaho. Its three flights travel to Salt Lake...
See similar textbooks
icon
Related questions
Question
AirBorne is a small airline operating out of Boise, Idaho. Its three flights travel to Salt Lake City, Reno, and Portland. The owner of the airline wants to assess the full cost of operating each flight. As part of this assessment, the costs of two support departments (maintenance and bag- gage) must be allocated to the three flights. The two support departments that support all three flights are located in Boise (any maintenance or baggage costs at the destination airports are directly traceable to the individual flights). Budgeted and actual data for the year are as follows for the support departments and the three flights: Support Centers Flights Maintenance Baggage Salt Lake City Reno Portland Budgeted data: Fixed overhead $240,000 S150,000 $20,000 $18,000 S30,000 S 30,000 $ 5,000 2,000 Variable overhead S 64,000 S 6,000 $10,000 4,000 Hours of flight time* Number of passengers Actual data: 2,000 10,000 15,000 5,000 S156,000 S 33,000 Fixed overhead $235,000 $ 80,000 $22,000 $17,000 $11,000 S29,500 $ 6,200 1,800 Variable overhead S 5,800 Hours of flight time Number of passengers 4,200 2,500 8,000 16,000 6,000 *Normal sctivity levels. Round all allocation ratios and variable rates to four significant digits. Round all allocated amounts to the nearest dollar. Required: 1. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to determine the cost of operating each flight. 2. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to evaluate performance. Do any costs remain in the two support departments after the allocation? If so, how much? Explain.
Transcribed Image Text:AirBorne is a small airline operating out of Boise, Idaho. Its three flights travel to Salt Lake City, Reno, and Portland. The owner of the airline wants to assess the full cost of operating each flight. As part of this assessment, the costs of two support departments (maintenance and bag- gage) must be allocated to the three flights. The two support departments that support all three flights are located in Boise (any maintenance or baggage costs at the destination airports are directly traceable to the individual flights). Budgeted and actual data for the year are as follows for the support departments and the three flights: Support Centers Flights Maintenance Baggage Salt Lake City Reno Portland Budgeted data: Fixed overhead $240,000 S150,000 $20,000 $18,000 S30,000 S 30,000 $ 5,000 2,000 Variable overhead S 64,000 S 6,000 $10,000 4,000 Hours of flight time* Number of passengers Actual data: 2,000 10,000 15,000 5,000 S156,000 S 33,000 Fixed overhead $235,000 $ 80,000 $22,000 $17,000 $11,000 S29,500 $ 6,200 1,800 Variable overhead S 5,800 Hours of flight time Number of passengers 4,200 2,500 8,000 16,000 6,000 *Normal sctivity levels. Round all allocation ratios and variable rates to four significant digits. Round all allocated amounts to the nearest dollar. Required: 1. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to determine the cost of operating each flight. 2. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to evaluate performance. Do any costs remain in the two support departments after the allocation? If so, how much? Explain.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 3 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Strategic business units
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS