Alpha Company’s travel department had the following budgeted costs for the coming year:
$\begin{array}{llr}
\text { Varnable costs } &\$ 34 \text { per trip } \
\text {Fixed costs } &\$ 143,360\
\end{array}$

$\begin{array}{lcc}
\text { The budgeted usage is given below: }\
&\text {Yearly Trips}&\text {Monthly Peak Trip}\
\text { West Sales Territory } & 110 \text { trips } & 5 \
\text { Midwest Sales Territory } & 170 \text { trips } & 12 \
\text { Southern Sales Territory } & 150 \text { trips } & 15 \
\text { Eastern Sales Territory } & 130 \text { trips } & 8\
\
\text { The actual usage is given helow }\
\text { West Sales Territory } & 100 \text { trips } \
\text { Midwest Sales Territory } & 150 \text { trips } \
\text { Southern Sales Territory } & 160 \text { trips } \
\text { Eastern Sales Territory } & 140 \text { trips }
\end{array}$
-Refer to the figure.Using both a fixed and variable rate with fixed costs allocated on the basis of monthly peak trips,what will the West Sales Territory be charged for the year (rounded to the nearest dollar)?

Question

Alpha Company’s travel department had the following budgeted costs for the coming year:
$\begin{array}{llr}
  \text { Varnable costs } &\$ 34 \text { per trip } \
 \text {Fixed costs  } &\$ 143,360\
\end{array}$

$\begin{array}{lcc}
\text { The budgeted usage is given below: }\
&\text {Yearly Trips}&\text {Monthly Peak Trip}\
\text { West Sales Territory } & 110 \text { trips } & 5 \
\text { Midwest Sales Territory } & 170 \text { trips } & 12 \
\text { Southern Sales Territory } & 150 \text { trips } & 15 \
\text { Eastern Sales Territory } & 130 \text { trips } & 8\
\
\text { The actual usage is given helow }\
\text { West Sales Territory } & 100 \text { trips } \
\text { Midwest Sales Territory } & 150 \text { trips } \
\text { Southern Sales Territory } & 160 \text { trips } \
\text { Eastern Sales Territory } & 140 \text { trips }
\end{array}$
-Refer to the figure.Using both a fixed and variable rate with fixed costs allocated on the basis of monthly peak trips,what will the West Sales Territory be charged for the year (rounded to the nearest dollar)?

Quizplus · Accepted Answer

The correct answer is A.The West Sales Territory is budgeted for 110 trips per year and has a monthly peak of 5 trips. The total budgeted variable cost for the West Sales Territory is $34 per trip * 110 trips = $3,740. The total budgeted fixed cost for the West Sales Territory is $143,360 * (5 trips / 52 trips) = $13,740. The total budgeted cost for the West Sales Territory is $3,740 + $13,740 = $17,480. The actual usage for the West Sales Territory is 100 trips. The actual variable cost for the West Sales Territory is $34 per trip * 100 trips = $3,400. The actual fixed cost for the West Sales Territory is $143,360 * (5 trips / 52 trips) = $13,740. The actual cost for the West Sales Territory is $3,400 + $13,740 = $17,140. The variance for the West Sales Territory is $17,480 - $17,140 = $340. The West Sales Territory will be charged $17,140 for the year.

Alpha Company’s Travel Department Had the Following Budgeted Costs for the Coming