Schabel Corporation Has Two Operating Divisions-A Consumer Division and a Commercial

question 179

Multiple Choice

Schabel Corporation has two operating divisions-a Consumer Division and a Commercial Division. The company's Customer Service Department provides services to both divisions. The variable costs of the Customer Service Department are budgeted at $78 per order. The Customer Service Department's fixed costs are budgeted at $270,000 for the year. The fixed costs of the Customer Service Department are determined based on the peak period orders. At the end of the year, actual Customer Service Department variable costs totaled $483,570 and fixed costs totaled $298,128. The Consumer Division had a total of 2,372 orders and the Commercial Division had a total of 3,703 orders for the year. For performance evaluation purposes, how much actual Customer Service Department cost should NOT be charged to the operating divisions at the end of the year?

• A) $28,128
• B) $37,848
• C) $9,720
• D) $0

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Definitions:

Probable Likelihood

A term indicating a high chance of occurrence or expectation that an event will happen.

Liability Estimation

The process of assessing the potential liabilities or debts that a business may incur in the future.

Estimable Liability

A financial obligation or debt that can be accurately estimated and measured for accounting and reporting purposes.

Probable Likelihood

The significant chance or high probability that an event will occur, often used in risk assessment.