Larubbio Corporation Has Two Operating Divisions--An Inland Division and a Coast

question 34

Essay

Larubbio Corporation has two operating divisions--an Inland Division and a Coast Division. The company's Customer Service Department provides services to both divisions. The variable costs of the Customer Service Department are budgeted at $23 per order. The Customer Service Department's fixed costs are budgeted at $407,100 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 $168,560 and fixed costs totaled $426,700. The Inland Division had a total of 2,110 orders and the Coast Division had a total of 4,770 orders for the year.
Required:
a. Prepare a report showing how much of the Customer Service Department's costs should be charged to each of the operating divisions at the end of the year.
b. How much of the actual Customer Service Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

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Definitions:

Units

Basic quantities or measurements used to express variables in various contexts, such as items, people, or currency.

Labor Demand Curve

A graphical representation showing the quantity of labor that firms are willing and able to hire at different wage levels, typically downward sloping.

Imperfectly Competitive

A market structure where individual sellers have some control over the market price due to product differentiation or other factors.

Purely Competitive

A market structure with many sellers offering identical products, leading to no individual influence on price by single sellers.