Question

The Western and Pacific Railroad has two divisions, the Western Division and the Pacific Division. The company recently invested $8,000,000 to maintain its railroad track. Pertinent data for the two divisions are as follows: Total Miles Traveled: Western Division 800,000 miles Pacific Division 1,200,000 miles The amount of track improvement cost that should be allocated to the Western Division is:

Answer 1

The amount of track improvement cost that should be allocated to the Western Division is  $3,200,000.

What amount should be allocated to Western Division?

The amount that should be allocated to Western Division is a function of the miles travelled on the Western division.

The amount to be allocated to Western Division : (miles travelled on Western division / total miles travelled) x cost of the revision

• miles travelled on Western division = 800,000 miles
• total miles travelled = 1,200,000 + 800,000 = 2,000,000 miles

The amount to be allocated to Western Division : (800,000 / 2,000,000) x 8,000,000  = $3,200,000

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