Direct Method, Variable versus Fixed Costing and Performance Evaluation AirBorne is a small airline 1 answer below »

Direct Method, Variable versus Fixed Costing and Performance Evaluation

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 baggage) 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:

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.

Allocation ratios for fixed costs
(Round allocation ratios to four decimal places when rounding is required.) SLC Reno Portland Hours of flight time Number of passengers

Variable rates:
(Round allocation ratios to four decimal places when rounding is required.) Maintenance: $ per flight hour Baggage: $ per passenger

Cost Allocation
(Round all calculated amounts to the nearest dollar when rounding is required.) SLC Reno Portland MaintenanceAc€??fixed: $ $ $ MaintenanceAc€??variable: BaggageAc€??fixed: BaggageAc€??variable: $ $ $

2. Using the direct method, allocate the support service costs to each flight, assuming that the objective is to evaluate performance. Round your intermediate calculations to the nearest dollar if rounding is required. SLC Reno Portland MaintenanceAc€??fixed: $ $ $ MaintenanceAc€??variable: BaggageAc€??fixed: BaggageAc€??variable: $ $ $

Do any costs remain in the two support departments after the allocation? If so, how much? Explain.

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