Princess Cruise Lines has the following service departments; concierge, valet, a

Question

Princess Cruise Lines has the following service departments; concierge, valet, and maintenance. Expense for these departments are allocated to Mediterranean and Trans-Atlantic cruises. Expenses for the departments are totaled (both variable and fixed components are combined) and as follows: Concierge $2,500,000 Valet $1,750,000 Maintenance $4,250,000 The sea miles logged are 6,000,000 for the Mediterranean and 18,000,000 for the Trans- Atlantic voyages. Based upon the sea miles logged, allocate the service department costs

Explanation / Answer

Total Service Costs

= $8,500,000

Total Sea Miles

= 24,000,000

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Service Costs, Mediterranean

$8,500,000/24,000,000 * 6,000,000

= $2,125,000

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Service Costs, Trans-Atlantic

$8,500,000/24,000,000 * 18,000,000

= $6,375,000

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