Delta Railroad Has Two Operating Divisions--Freight and Passenger

Multiple Choice

Delta Railroad has two operating divisions--Freight and Passenger. The Maintenance Department serves both divisions. Variable Maintenance Department costs are budgeted at $12 per thousand miles. The fixed Maintenance Department costs are budgeted at $800,000 per year. The level of the fixed Maintenance Department costs are determined by the peak-period requirements. Data for last year follow:

During last year, the Maintenance Department actually incurred $650,000 in variable costs and $815,000 in fixed costs.
-For performance evaluation purposes, how much of the fixed Maintenance Department cost should be charged to the Freight Division at the end of the year?

A) $480,000
B) $440,000
C) $472,000
D) $50,000