Concept:The question tests the setting of a dialogue about a smuggling operation between a subordinate and his boss, Chief.Explanation:The speaker addresses “Chief” and discusses business matters like “expenses” and “overhead allocation.”Such a report about managing “the boys” and the “smuggling racket” is most naturally made in a private business setting.A street, a hotel, or a police station do not fit the confidential, business-style report.Answer:B. Chief's office