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 retail division should amount to:
A) $0.
B) $29.
C) $85,260.
D) $117,740.
E) $203,000.

Question

Quizplus · Accepted Answer

The total cost of $203,000 needs to be allocated between the wholesale and retail divisions based on the number of calls. With 7,000 calls initiated and 2,940 of these for the wholesale operation, the remaining 4,060 calls (7,000 - 2,940) were for the retail division. The cost allocation for the retail division can be calculated as follows: (4,060 calls / 7,000 total calls) * $203,000 total cost = $117,740.

Pound Industries' Customer Service Department Follows Up on Customer Complaints