Derico Corporation has two operating divisions-an Atlantic Division and a Pacific Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $42 per shipment.The Logistics Department's fixed costs are budgeted at $365,800 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year,actual Logistics Department variable costs totaled $388,800 and fixed costs totaled $378,080.The Atlantic Division had a total of 4,700 shipments and the Pacific Division had a total of 4,300 shipments for the year.For performance evaluation purposes,how much actual Logistics Department cost should NOT be charged to the operating divisions at the end of the year?
A)$23,080
B)$0
C)$12,280
D)$10,800

Question

Derico Corporation has two operating divisions-an Atlantic Division and a Pacific Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $42 per shipment.The Logistics Department's fixed costs are budgeted at $365,800 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand.  At the end of the year,actual Logistics Department variable costs totaled $388,800 and fixed costs totaled $378,080.The Atlantic Division had a total of 4,700 shipments and the Pacific Division had a total of 4,300 shipments for the year.For performance evaluation purposes,how much actual Logistics Department cost should NOT be charged to the operating divisions at the end of the year?
A)$23,080 
B)$0 
C)$12,280 
D)$10,800

Quizplus · Accepted Answer

The amount of cost that would be charged to each of the operating divisions at the end of the year would be as follows:
 11eaaee8_669d_e19d_933a_3d37d03b1c0a_TB5186_00 The spending variance represents the difference between the Logistics Department's actual costs and what those costs should have been,given the actual level of activity.This difference is properly the responsibility of the Logistics Department and should not be charged to the operating divisions.

Derico Corporation Has Two Operating Divisions-An Atlantic Division and a Pacific