The Maintenance Department of Management Just Like Home Suites Hotel has fixed costs of \($1,000,000\) a year. It also incurs \($60\) in out-of-pocket expenses for every hour of work. During the year the Rooms Department used 30,000 maintenance hours. The Food and Beverage (F&B) Department used 10,000 maintenance hours. When the Maintenance Department was established the Rooms and F&B departments estimated they would need 30,000 and 20,000 maintenance hours, respectively. It turns out F&B cut back on maintenance hours used to insure it would meet its budget.

Required

a. Calculate the amount of Maintenance Department costs to allocate to Rooms and F&B based entirely on actual usage.

b. Calculate the amount of Maintenance Department costs to allocate to Rooms and F&B using a dual allocation approach where fixed cost is allocated based on estimated capacity needed and variable cost is allocated based on actual usage.

c. Which of the two methods applied in parts a. and b. is more fair to the two departments?

d. Assume that the Maintenance Department allocates costs to the producing departments using a user charge. What amount would you suggest for the user charge? Is it a good idea to use a user charge for allocating costs?