Pound Industries' customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 7,000 calls and incurred costs of $203,000. If 2,940 of these calls were for the company's wholesale operation (the remainder were for the retail division), costs allocated to the wholesale operation should amount to:
A) $0.
B) $29.
C) $85,260.
D) $117,740.
E) $203,000.

Question

Quizplus · Accepted Answer

The costs allocated to the wholesale operation can be calculated based on the proportion of calls related to it. With 2,940 calls for the wholesale operation out of 7,000 total calls, the fraction of calls for the wholesale operation is 2,940 / 7,000. The total cost of $203,000 multiplied by this fraction gives the cost allocated to the wholesale operation: $203,000 * (2,940 / 7,000) = $85,260.

Pound Industries' Customer Service Department Follows Up on Customer Complaints