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Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the companys mine to its two steel millsthe Northern Plant

Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the companys mine to its two steel millsthe Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $175,600 per year, consisting of $0.21 per ton variable cost and $125,600 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 59% of the Transport Services Departments capacity and the Southern Plant requires 41%.

During the year, the Transport Services Department actually hauled 113,000 tons of ore to the Northern Plant and 69,300 tons to the Southern Plant. The Transport Services Department incurred $358,000 in cost during the year, of which $53,800 was variable cost and $304,200 was fixed cost.

Required:

1. How much of the Transport Services Departments variable costs should be charged to each plant?

2. How much of the $304,200 in fixed cost should be charged to each plant?

3. Should any of the Transport Services Departments actual total cost of $358,000 be treated as a spending variance and not charged to the plants?

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