Question

Aladin's customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 8,600 calls and incurred costs of $189,200. If 3,460 of these calls were for the company's wholesale operation (the remainder were for the retail division), costs allocated to the wholesale operation under activity‐based costing system should amount to:

Answer 1

$76,120

Step-by-step explanation:

For computing the allocated cost, first we have to determine the per call cost which is shown below:

Per call cost = Cost incurred ÷ number of calls

= $189,200 ÷ 8,600 calls

= $22

The calls for wholesale operation = 3,460 calls

The calls for retail division would be

= 8,600 calls - 3,460 calls

= 5,140 calls

Now the allocated cost to the wholesale operation would be

= 3,460 calls × $22

= $76,120