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

question 16

Multiple Choice

Yacavone 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 $43 per order. The Customer Service Department's fixed costs are budgeted at $274,400 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 $216,090 and fixed costs totaled $292,890. The Consumer Division had a total of 1,310 orders and the Commercial Division had a total of 3,590 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)$18,490
• B)$5,390
• C)$23,880
• D)$0

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Definitions:

Price Discrimination

A pricing strategy where identical or substantially similar goods or services are sold at different prices by the same provider in different markets.

Third-degree Price Discrimination

A pricing strategy where a firm charges different prices to different groups of consumers for the same product, based on their willingness to pay.

Tennis Lessons

Instruction or training sessions focused on improving a person's skills and understanding of the game of tennis, offered by professionals or experienced players.

Producer Surplus

The discrepancy between the amount sellers are prepared to take for a product or service and the actual payment they get.