Seattle Corporation has two operating divisions - Inland Division and Coast Division. The company's Customer Service Department provides services to both divisions. The variable costs of the Customer Service Department are budgeted at $29 per order. The Customer Service Department's fixed costs are budgeted at $381,600 for the year. The fixed costs of the Customer Service Department are determined based on the peak period orders. Percentage of PeakPeriod Capacity Required Budgeted OrdersInland Division25% 1,500 Coast Division75% 5,700 At the end of the year, actual Customer Service Department variable costs totaled $219,905 and fixed costs totaled $383,860. The Inland Division had a total of 1,520 orders and the Coast Division had a total of 5,690 orders for the year.Required:a.
Prepare a report showing how much of the Customer Service Department's costs should be charged to each of the operating divisions at the end of the year.b. How much of the actual Customer Service Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?
What will be an ideal response?
a.
The operating divisions would be charged the following amounts at the end of the year:
| Inland Division | Coast Division | ||||||
| Variable cost charges: | |||||||
| $29 per order × 1,520 orders | $ | 44,080 | |||||
| $29 per order × 5,690 orders | $ | 165,010 | |||||
| Fixed cost charges: | |||||||
| 25% × $381,600 | 95,400 | ||||||
| 75% × $381,600 | 286,200 | ||||||
| Total charges | $ | 139,480 | $ | 451,210 | |||
The uncharged costs are:
| Variable | Fixed | ||||||
| Total actual costs incurred | $ | 219,905 | $ | 383,860 | |||
| Costs charged | 209,090 | 381,600 | |||||
| Spending variance | $ | 10,815 | $ | 2,260 | |||
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