Asked by Hunter McGaughey on Jun 15, 2024
Verified
Sauseda 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 $38 per order. The Customer Service Department's fixed costs are budgeted at $433,200 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 $303,240 and fixed costs totaled $450,280. The Inland Division had a total of 2,430 orders and the Coast Division had a total of 5,170 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?
Customer Service Department
The division of a company focused on addressing customer inquiries, complaints, and service requests.
Operating Divisions
Operating divisions are distinct sectors within a company that focus on different products or markets, each potentially with its own management structure.
Fixed Costs
Financial obligations like rent, salaries, and insurance that remain steady, irrespective of the levels of sales or production achieved.
- Review the contribution of variable and unchanging costs in shaping the internal transfer prices and charges to divisions.
- Elevate skill levels in the arena of financial reporting for internal sectors, touching upon the specifics of how costs are allocated and accounting responsibilities are managed.
Verified Answer
b.The uncharged costs are:
The spending variance represents the difference between the Customer Service Department's actual costs and what those costs should have been, given the actual level of activity. This difference is properly the responsibility of the Customer Service Department and should not be charged to the operating divisions.
Learning Objectives
- Review the contribution of variable and unchanging costs in shaping the internal transfer prices and charges to divisions.
- Elevate skill levels in the arena of financial reporting for internal sectors, touching upon the specifics of how costs are allocated and accounting responsibilities are managed.
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