Question

Bartolo Delivery has two divisions, air express and ground service, that share the common costs of the company’s communications network, which are $8,200,000 a year. You have the following information about the two divisions and the common communications network:

Calls (thousands) Time on Network (hours)

Air express 588,000 337,500

Ground service 252,000 1,012,500

Required: Determine the cost allocation if $5.74 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. (Do not round intermediate calculations. Enter your answers in thousands of dollars.)

(Air Express, Ground Service)

Fixed:

Variable:

Total :

Answer 1

Total Fixed Costs	$             57,40,000
Total time taken(337,500+1,012,500)	13,50,000	hours
Fixed cost per hour	4.25185185	per hour
Total Variable costs	$             24,60,000
Total Calls made(588,000+252,000)	840000	calls
Variable Cost incurred per call made	$          2.92857143	per call made
	Air Express	Ground Service
Fixed(Hours incurred*$4.25185185)	$             14,35,000	$                           43,05,000
Variable(Calls made*$2.92857143)	$             17,22,000	$                             7,38,000
Total	$             31,57,000	$                           50,43,000