Packages-2-Go has two divisions, air express and ground service, that share the

Question

Packages-2-Go has two divisions, air express and ground service, that share the common costs of the company’s communications network, which are $5,440,000 a year. You have the following information about the two divisions and the common communications network: Calls (thousands) Time on Network (hours) Air express 169,000 100,000 Ground service 82,000 450,000 Required: Determine the cost allocation if $3.10 million of the communications network costs are fixed and allocated on the basis of time on network, and the remaining costs, which are variable, are allocated on the basis of the number of calls. (Do not round intermediate calculations. Round final answers to the nearest dollar amounts.)

I need the fixed and variable price for air express and ground service

Explanation / Answer

Network hrs:

Fixed

(100,000+450,000)= 550,000 network hrs

Calls thousands:

(169,000+82,000)=251,000 hrs

Variable Expenses=$5,440,000-$3,100,000=$2,340,000

Air Express:

Fixed Expense: $3,100,000/550,000 x 100,000=$563,636

Variable =         $2,340,000 x 169,000/251,000=$1,575,538

Total Cost                                                         =$2,139,174

Ground Service:

Fixed Expense: $3,100,000/550,000 x 450,000=$2,536,364

Variable =         $2,340,000 x 82,000/251,000=$764,462

Total Cost                                                         =$3,300,826

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