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Question - Bartolo Delivery has two divisions, air express and ground service, that share the common costs of the company's communications network, which are $8,700,000 a year. You have the following information about the two divisions and the common communications network:
Calls (thousands)
Time on Network (hours)
Air express
511,000
370,000
Ground service
219,000
1,110,000
Required - Determine the cost allocation if $5.22 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.
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