Wollan Corporation Has Two Operating Divisions--An East Division and a West

question 9

Multiple Choice

Wollan Corporation has two operating divisions--an East Division and a West Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $44 per shipment. The Logistics Department's fixed costs are budgeted at $237,600 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 $332,880 and fixed costs totaled $253,960. The East Division had a total of 4,300 shipments and the West Division had a total of 3,000 shipments for the year.
How much Logistics Department cost should be allocated to the West Division at the end of the year?

• A) $289,176
• B) $229,644
• C) $241,167
• D) $274,560

---

Definitions:

Illusory Correlation

The perception of a relationship between two variables even when no such relationship exists.

Heuristic Correlation

Refers to the use of simple, efficient rules or mental shortcuts that help people make decisions or solve problems, often applied in the context of establishing relationships or patterns between variables without rigorous analysis.

Associative Correlation

Involves relationships between variables where the presence or magnitude of one variable is naturally linked to the presence or magnitude of another, often through association rather than causation.