Chi Company has a regional division and a national division and a travel

department which supports the employees in both divisions. The fixed costs of the travel department ($30,000 per month) are allocated based on the peak usage of reservation services. The national division has a peak monthly usage of 300 reservations and the regional has a peak usage of 200 reservations. The variable costs of the travel department are allocated to the divisions based on the number of reservations made, at a rate of $20 per reservation.

1. If the Regional division requires 180 reservations and the National division requires 170 reservations, calculate the amount of travel department costs that will be allocated to each of the divisions.

2. Explain why the allocation is higher to National when it uses fewer reservations.