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    Allocation Bases to each Division

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    Chad company has a domestic division and an internal division and a travel department which supports the employees in both divisions. The fixed costs of the travel department ($405,000) are allocated based on the number of employees in each division. There are 210 employees in the domestic division and 70 employees in the international division. The variable costs of the travel department are allocated to the divisions based on the number of reservations made, at a rate of $15 per reservation.

    If the domestic division requires 1,500 reservations and the international division requires 2,000 reservations, calculate the amount of travel department costs that will be allocated to each division.

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    Solution Preview

    Let us start with the fixed costs first.
    The given total fixed cost is = $405,000
    The allocation basis is the employees.
    The total number of employees for both the division is = 210+ ...

    Solution Summary

    The solution calculates the amount of travel department costs that will be allocated to each division.

    $2.19

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