Actual versus Budgeted Costs

Kumar, Inc., evaluates managers of producing departments on their ability to control costs. In addition to the costs directly traceable to their departments, each production manager is held responsible for a share of the costs of a support center, the Human Resources (HR) Department. The total costs of HR are allocated on the basis of actual direct labor hours used. The total costs of HR and the actual direct labor hours worked by each producing department are as follows:

	Year 1		Year 2
Direct labor hours worked:
Department A	24,000		26,000
Department B	36,000		26,000
Total hours	60,000		52,000
Actual HR cost	$160,000		$160,000
Budgeted HR cost	115,000	*	113,000	*

*$0.25 per direct labor hour plus $100,000.

Required:

Allocate the HR costs to each producing department for Year 1 and Year 2 using the direct method with actual direct labor hours and actual HR costs.

	Year 1	Year 2
Department A	$______	$____
Department B	$______	$_____

Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made. During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000. Normal and actual activity (copies made) are as follows:

	Copy Center 1	Copy Center 2
Normal activity (copies)	600,000	400,000
Actual activity (copies)	500,000	440,000

For purposes of performance evaluation, fixed costs allocated to Copy Center 2 are:

a.$28,800.

b.$51,200.

c.$24,000.

d.$60,000.