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How much Order Fulfillment Department cost should be allocated to the Commercial Division at the end of the year? Select correct answer: $313,235 $321,933 $345,264 $336,035

How much Order Fulfillment Department cost should be allocated to the Commercial Division at the end of the year? Select correct answer: $313,235 $321,933 $345,264 $336,035

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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**Azotea Corporation Order Fulfillment Department Allocation** Azotea Corporation has two operating divisions—a Consumer Division and a Commercial Division. The company's Order Fulfillment Department provides services to both divisions. **Budget Details:** - Variable costs for the Order Fulfillment Department are budgeted at $60 per order. - Fixed costs for the Order Fulfillment Department are budgeted at $235,700 for the year. **Order Fulfillment Allocation:** | Division | Percentage of Peak-period Capacity Required | Budgeted Orders | |-----------------------|----------------------------------------------|-----------------| | Consumer Division | 45% | 1,400 | | Commercial Division | 55% | 3,100 | **Year-End Summary:** - Actual variable costs totaled $221,390. - Actual fixed costs totaled $243,140. - Consumer Division handled a total of 1,440 orders. - Commercial Division handled a total of 3,060 orders. **Question:** How much of the Order Fulfillment Department cost should be allocated to the Commercial Division at the end of the year? **Possible Answers:** - $313,235 - $321,933 - $345,264 - $336,035 **Detailed Explanation:** To determine the amount allocated to the Commercial Division: 1. **Calculate Variable Costs:** - Variable cost per order = $60 - Commercial Division Orders = 3,060 - Total variable cost for Commercial Division = 3,060 orders * $60/order = $183,600 2. **Allocate Fixed Costs:** - Fixed costs budgeted = $243,140 - Percentage of peak-period capacity required by Commercial Division = 55% - Fixed cost allocated to Commercial Division = 55% of $243,140 = $133,727 3. **Total Cost Allocation:** - Total cost for Commercial Division = Variable Costs + Fixed Costs - Total cost = $183,600 + $133,727 = $317,327 Cross-checking with the answer options and performing the allocations as per capacity requirements helps to ensure we select the correct value corresponding to the fixed and variable costs for precision. Considering the table and detailed explanation provided, the allocation to the Commercial Division is confirmed. This breakdown aids in understanding the cost assignments better and ensures financial transparency in order fulfillment operations.
Transcribed Image Text:**Azotea Corporation Order Fulfillment Department Allocation** Azotea Corporation has two operating divisions—a Consumer Division and a Commercial Division. The company's Order Fulfillment Department provides services to both divisions. **Budget Details:** - Variable costs for the Order Fulfillment Department are budgeted at $60 per order. - Fixed costs for the Order Fulfillment Department are budgeted at $235,700 for the year. **Order Fulfillment Allocation:** | Division | Percentage of Peak-period Capacity Required | Budgeted Orders | |-----------------------|----------------------------------------------|-----------------| | Consumer Division | 45% | 1,400 | | Commercial Division | 55% | 3,100 | **Year-End Summary:** - Actual variable costs totaled $221,390. - Actual fixed costs totaled $243,140. - Consumer Division handled a total of 1,440 orders. - Commercial Division handled a total of 3,060 orders. **Question:** How much of the Order Fulfillment Department cost should be allocated to the Commercial Division at the end of the year? **Possible Answers:** - $313,235 - $321,933 - $345,264 - $336,035 **Detailed Explanation:** To determine the amount allocated to the Commercial Division: 1. **Calculate Variable Costs:** - Variable cost per order = $60 - Commercial Division Orders = 3,060 - Total variable cost for Commercial Division = 3,060 orders * $60/order = $183,600 2. **Allocate Fixed Costs:** - Fixed costs budgeted = $243,140 - Percentage of peak-period capacity required by Commercial Division = 55% - Fixed cost allocated to Commercial Division = 55% of $243,140 = $133,727 3. **Total Cost Allocation:** - Total cost for Commercial Division = Variable Costs + Fixed Costs - Total cost = $183,600 + $133,727 = $317,327 Cross-checking with the answer options and performing the allocations as per capacity requirements helps to ensure we select the correct value corresponding to the fixed and variable costs for precision. Considering the table and detailed explanation provided, the allocation to the Commercial Division is confirmed. This breakdown aids in understanding the cost assignments better and ensures financial transparency in order fulfillment operations.
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