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Higuera Corporation has two operating divisions-a Consumer Division and a Commercial Division. The company's Order Fulfillment Department provides services to both divisions. The variable costs of the Order Fulfillment Department are budgeted at $28 per order. The Order Fulfillment Department's fixed costs are budgeted at $280,800 for the year. The fixed costs of the Order Fulfillment Department are budgeted based on the peak period orders.

Percentage of Peak Period Budgeted Orders

Capacity required
Consumer Division 40% 1,700

Commercial Division 60% 3,500

At the end of the year, actual Order Fulfillment Department variable costs totaled $152,810 and fixed costs totaled $286,580. The Consumer Division had a total of 1,720 orders and the Commercial Division had a total of 3,460 orders for the year.

1. How much Order Fulfillment Department cost should be allocated to the Commercial Division at the end of the year?

A. $284,441 B. $274,018 C. $293,492 D. $265,360

2. How much actual Order Fulfillment Department cost should not be allocated to the operating divisions at the end of the year?

A. $0
B. $5,780 C. $13,550 D. $7,770

3. Costs which are always relevant in decision making are those costs which are:

A. variable. B. avoidable. C. sunk.D. fixed.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9943992

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