Erholm Corporation Has Two Operating Divisions--An Atlantic Division and a Pacific

question 28

Multiple Choice

Erholm Corporation has two operating divisions--an Atlantic Division and a Pacific Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $31 per shipment. The Logistics Department's fixed costs are budgeted at $411,800 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year, actual Logistics Department variable costs totaled $290,700 and fixed costs totaled $431,950. The Atlantic Division had a total of 3,900 shipments and the Pacific Division had a total of 5,100 shipments for the year. How much Logistics Department cost should be charged to the Pacific Division at the end of the year for performance evaluation purposes?

• A) $391,453
• B) $425,770
• C) $445,498
• D) $409,502

---

Definitions:

Confounded

Mixed or muddled feelings or situations where the cause and effect become unclear or complicated.

Independent Variable

In an experimental setting, the variable that is manipulated or changed to observe its effect on a dependent variable.

Decision-making Experiment

An experimental setup designed to understand how individuals make choices under various conditions.

Experimental Method

A scientific procedure undertaken to discover information or to test a hypothesis by varying conditions and observing the outcomes.