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 
b.
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 
The spending variance represents the difference between the Customer Service Department's actual costs and what those costs should have been, given the actual level of activity. This difference is probably the responsibility of the Customer Service Department and should not be charged to the operating divisions.  

Business

You might also like to view...

How are cash balance plans different from defined-benefit and defined-contribution plans?

What will be an ideal response?

Business

When an account balance is not affected by an adjusting entry, the amount shown in the Trial Balance column of the work sheet is extended directly to the Adjusted Trial Balance columns

Indicate whether the statement is true or false

Business

An example of authority ranking as a form of relationship would include

A. fraternal organizations. B. auto salesperson and buyer. C. soldiers and their commander. D. college roommates.

Business

Explain the process that exempts members of an LLC (limited liability company) from double taxation

What will be an ideal response?

Business