Calculating and Using Dual Charging Rates

The expected costs for the Maintenance Department of Stazler, Inc., for the coming year include:

Fixed costs (salaries, tools): $67,710 per year

Variable costs (supplies): $1.45 per maintenance hour

The Assembly and Packaging departments expect to use maintenance hours relatively evenly throughout the year. The Fabricating Department typically uses more maintenance hours in the month of November. Estimated usage in hours for the year and for the peak month is as follows:

	Yearly hours	Monthly Peak Hours
Assembly Department	4,400		500
Fabricating Department	6,800		1,250
Packaging Department	11,000		750
Total maintenance hours	22,200		2,500

Actual usage for the year by:

Assembly Department	3,500
Fabricating Department	6,900
Packaging Department	10,200
Total maintenance hours	20,600

Required:

1. Calculate a variable rate for the Maintenance Department. Round your answer to the nearest cent. $fill in the blank 1 per maintenance hour

Calculate the allocated fixed cost for each using department based on its budgeted peak month usage in maintenance hours. Round your answers to the nearest dollar.

Department	Peak Number of Hours	Allocated Fixed Cost
Assembly	fill in the blank 2	$fill in the blank 3
Fabricating	fill in the blank 4	fill in the blank 5
Packaging	fill in the blank 6	fill in the blank 7
Total	fill in the blank 8	$fill in the blank 9

2. Use the two rates to assign the costs of the Maintenance Department to the user departments based on actual usage. Calculate the total amount charged for maintenance for the year. Round your answers to the nearest dollar.

Assembly	$fill in the blank 10
Fabricating	fill in the blank 11
Packaging	fill in the blank 12
Total	$fill in the blank 13

3. What if the Assembly Department used 3,550 maintenance hours in the year? How much would have been charged out to the three departments? Round your answers to the nearest dollar.

Assembly	$fill in the blank 14
Fabricating	fill in the blank 15
Packaging	fill in the blank 16
Total	$fill in the blank 17

Feedback Area

Feedback

1. Variable rate is based on budgeted usage. For an example of how to calculate the allocated fixed cost for each department.

2. Fixed support department costs are allocated on the basis of original capacity.

3. Calculate as in Requirement 2 and change the Assembly Department's usage to 3,550.

Needs Instructor Grading.

See Example 7.2.