Cannata Corporation has two operating divisions--a North Division and a South Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $32 per shipment. The Logistics Department's fixed costs are budgeted at $372,300 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand.
At the end of the year, actual Logistics Department variable costs totaled $335,000 and fixed costs totaled $382,850. The North Division had a total of 4,700 shipments and the South Division had a total of 5,300 shipments for the year.Required:a. Prepare a report showing how much of the Logistics Department's costs should be charged to each of the operating divisions at the end of the year.b. How much of the actual Logistics 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?

Question

Cannata Corporation has two operating divisions--a North Division and a South Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $32 per shipment. The Logistics Department's fixed costs are budgeted at $372,300 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand.

At the end of the year, actual Logistics Department variable costs totaled $335,000 and fixed costs totaled $382,850. The North Division had a total of 4,700 shipments and the South Division had a total of 5,300 shipments for the year.Required:a. Prepare a report showing how much of the Logistics Department's costs should be charged to each of the operating divisions at the end of the year.b. How much of the actual Logistics 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?

Stephanie Zapata · Accepted Answer

Final Answer :

a.The operating divisions would be charged the following amounts at the end of the year:

b.The uncharged costs are:

The spending variance represents the difference between the Logistics 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 Logistics Department and should not be charged to the operating divisions.

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