Question

Bartolo Delivery has two divisions, air 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: Calls (thousands) 623,000 267,000 Time on Network (hours) 365,000 1,095,000 Air express Ground service Required: Determine the cost allocation if $5.81 million of the communications network costs are fixed and allocated on the basis of time on network, and the remaining costs, which are variable, are allocated on the basis of the number of calls. (Enter your answers in whole dollars. Do not round intermediate calculations.) Ground Service Air Express $ 1,452,500 Fixed Variable Total $ 1,452,500 $

Answer 1

Answer:

STATEMENT SHOWING JOINT COST ALLOCATION AMONG DIVISIONS
DETAILS OF COST	BASIS OF ALLOCATION	Total ($)	Air express	Ground Service
Fixed Cost	Time (365:1095)	58,10,000	14,52,500	43,57,500
Variable Cost	No fo Calls ( 623:267)	24,90,000	17,43,000	7,47,000
		83,00,000	31,95,500	51,04,500
Fixed cost had been allocated on the basis of time as specified in the question
Air expenses = 5810*365/1460
Ground Serv = 5810*1095/1460
Similartly variable cost allocation is done on the basis on usge of network i.e no of calls made