Alamo's 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

To allocate costs to the retail division, we need to determine the proportion of calls that were for the retail division.

Total calls for retail division = Total calls - Calls for wholesale division
Total calls for retail division = 7,000 - 2,940
Total calls for retail division = 4,060

We can use this proportion to allocate the costs:

Costs for retail division = (Calls for retail division / Total calls) * Total costs
Costs for retail division = (4,060 / 7,000) * $203,000
Costs for retail division = $117,740

Therefore, the answer is (D) $117,740.

Alamo's Customer Service Department Follows Up on Customer Complaints by Telephone