(Answered) Question - acme business products currently shiops office

Accounting

Question - Acme Business Products currently shiops office equipment via Wiley Trucks to its retail outlets. Management is evaluating the possibility of purchasing its own trucking subsidiary due to union activity in the trucking industry. In 2003, Wiley Trucks charge Acme $10.00 per ton-miles (one tone carried one mile). Acme budgeted its shipment needs for 2003 at 750,000 ton-miles. Buggs Trucking is up for sales. Tentative budgeted distribution requirements for 2004 reflect the transportation of 750,000 ton-miles. Practical capacity reflects the potential to run 1,250,000 ton-miles. Budgeted distribution costs for Buggs Trucking are: Variable operating costs $6.50 per ton-mile, Fixed Costs $8,000,000. Each of the retail outlets is charged for cost of products delivered to it. What is the allocated cost per ton-miles in 2003 if costs are allocated according to budgeted usage?

a) $17.17

b) $14.50

c) $12.90

d) $10.00

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