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

question 227

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 $37 per shipment. The Logistics Department's fixed costs are budgeted at $417,800 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 $296,700 and fixed costs totaled $437,950. The Atlantic Division had a total of 4,500 shipments and the Pacific Division had a total of 5,700 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) $397,453
• B) $482,470
• C) $451,498
• D) $466,202

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Definitions:

Disequilibrium

The condition that exists in a market when the plans of buyers do not match those of sellers; a temporary mismatch between quantity supplied and quantity demanded as the market seeks equilibrium

Government Intervention

Actions taken by a government to influence or regulate various activities in its economy, which can include fiscal policy, monetary policy, tariffs, and regulation.

Mismatch

A situation where there is a discrepancy or lack of alignment between two or more factors, often leading to inefficiency.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level in a market.