Sauseda Corporation has two operating divisions-an Inland Division and a Coast Division. The company's Customer Service Department provides services to both divisions. The variable costs of the Customer Service Department are budgeted at $30 per order. The Customer Service Department's fixed costs are budgeted at $474,000 for the year. The fixed costs of the Customer Service Department are determined based on the peak-period orders.
At the end of the year, actual Customer Service Department variable costs totaled $239,295 and fixed costs totaled $476,350. The Inland Division had a total of 1,585 orders and the Coast Division had a total of 5,940 orders for the year.
Required:a. Prepare a report showing how much of the Customer Service Department's costs should be charged to each of the operating divisions at the end of the year.b. How much of the actual Customer Service 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

Sauseda Corporation has two operating divisions-an Inland Division and a Coast Division. The company's Customer Service Department provides services to both divisions. The variable costs of the Customer Service Department are budgeted at $30 per order. The Customer Service Department's fixed costs are budgeted at $474,000 for the year. The fixed costs of the Customer Service Department are determined based on the peak-period orders.

At the end of the year, actual Customer Service Department variable costs totaled $239,295 and fixed costs totaled $476,350. The Inland Division had a total of 1,585 orders and the Coast Division had a total of 5,940 orders for the year.
Required:a. Prepare a report showing how much of the Customer Service Department's costs should be charged to each of the operating divisions at the end of the year.b. How much of the actual Customer Service 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?

Austin Arnall · 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 Customer Service 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 Customer Service Department and should not be charged to the operating divisions.

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