Question - Tasman Products, Ltd., of Australia has a Maintenance Department that services the equipment in the company's Forming Department and Assembly Department. The cost of this servicing is charged to the operating departments on the basis of machine-hours. Cost and other data relating to the Maintenance Department and to the other two departments for the most recent year are presented below.
Data for the Maintenance Department follow:
|
|
Budget
|
Actual
|
|
Variable costs for lubricants
|
$96,000*
|
$110,000
|
|
Fixed costs for salaries and other
|
$150,000
|
$153,000
|
*Budgeted at $0.40 per machine-hour.
Data for the Forming and Assembly departments follow:
|
|
Percentage of Peak-Period Capacity Required
|
Machine-Hours
|
|
Budget
|
Actual
|
|
Forming Department
|
70%
|
160,000
|
190,000
|
|
Assembly Department
|
30%
|
80,000
|
70,000
|
|
Total
|
100%
|
240,000
|
260,000
|
The level of fixed costs in the Maintenance Department is determined by peak-period requirements.
Required: Management would like data to assist in comparing actual performance to planned performance in the Maintenance Department and in the other departments.
1. How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department?
|
|
Forming Department
|
Assembly Department
|
Total
|
|
Variable costs
|
76,000
|
28,000
|
104,000
|
|
Fixed costs
|
105,000
|
45,000
|
150,000
|
|
Total cost charged
|
181,000
|
73,000
|
254,000
|
2. Compute the amount of the actual Maintenance Department costs that should not be charged to the other departments?
|
|
Variable cost
|
Fixed cost
|
Total
|
|
Cost not charged (spending variance)
|
|
3,000
|
3,000
|