Question

Bartolo Delivery has two divisions, alr express and ground service, that share the common costs of the company's communications network, which are $8,300,000 a year. You have the following Information about the two divisions and the common communications network. Time on Network (hours) 345,000 1,835,000 Calls (thousands) 546, eee 234,00 Air express Ground service Required: a. What is the communications network cost that is charged to each division if the number of calls is used as the allocation basis? b. What is the communications network cost to each division using time on network as the allocation basis? Complete this question by entering your answers in the tabs below. Required A Required B What is the communications network cost that is charged to each division if the number of calls is used as the allocation basis? (Do not round intermediate calculations.) Division Network Cost Air express Ground service

Answer 1

Part 1
	Statement for allocation of Common Costs:
	Common Costs incurred	$             83,00,000
	Total Calls made(546,000+234,000)	780000	calls
	Cost incurred per call made	$        10.64102564	per call made
	Division(546,000*$10.64102564)	$             58,10,000
	Ground Service(234,000*$10.64102564)	$             24,90,000
Part 2
	Total Fixed Costs	$             60,90,000
	Total time taken(347,500+1,042,500)	13,90,000	hours
	Fixed cost per hour	4.38129496	per hour
	Total Variable costs	$             26,10,000
	Total Calls made(553,000+237,000)	790000	calls
	Variable Cost incurred per call made	$          3.30379747	per call made
		Air Express	Ground Service
	Fixed(Hours incurred*$4.38129496)	$             15,22,500	$                           45,67,500
	Variable(Calls made*$3.30379747)	$             18,27,000	$                             7,83,000
	Total	$             33,49,500	$                           53,50,500