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Budgeting

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Description

Single versus dual rates, manager incentives, transfer pricing Cheng and Gonzales operate atrucking company that hauls produce from California to the East Coast. There are three departments: West Coast, Midwest, and East Coast. A number of support services for the departmentsareprovided in California. One of these is truck maintenance. Whena driver returns to California to pickup produce, trucks may be washed and serviced, and any repairs may be undertaken. The maintenancedepartment’s operating costs per month are $16,000 plus $35 per labor hour for the hoursworked on each truck. Last year’s demand was as follows: Department ActualBudgeted West300 hours 270 hours Midwest 350 hours 380 hours East Coast400 hours 400 hours A. Allocate total costs based on the single-rate method using budgeted hours. B. Allocate total costs based on the single-rate method using actual hours. C. Allocate total costs based on the dual-rate method, using budgeted hours for fixed costs andactual hours for variable costs. D. Describe the optimal use of the maintenance department by the three trucking de partments. E. Suppose these allocations are considered part of each manager’s department costs, and the managers are rewarded for reducing costs. Describe managers’ incentives for determining a budgeted amount and then for their actual usage under : 1. Single-rate method using budgeted hours. 2. Single-rate method using actual hours. 3. Dual-rate method. F. Recommend a transfer pricing policy for the maintenance department, and list severa ladvantages and disadvantages for that policy. Accounting Assignment Help, Accounting Homework help, Accounting Study Help, Accounting Course Help

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