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Baxter customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 10,000 calls and incurred costs of $312,000. Of these calls, 3,800 were for the company's wholesale operation; the remainder was for the retail division.

Costs allocated to the retail division are:


a) $0. b) $31,200. c) $118,560. d) $193,440. e) $203,000.

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Answer:

D) $193,440.

Explanation:

total number of calls: 10,000

total cost = $312,000

cost per call = $312,000 / 10,000 calls = $31.20

cost of calls associated to the wholesale operation = 3,800 calls x $31.20 = $118,560

cost of calls associated to the retail division = (total number of calls - calls associated to wholesale operations) x cost per call = (10,000 calls - 3,800 calls) x $31.20 = 6,200 x $31.20 = $193,440

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