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Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel mills--the Northern Plant
Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel mills--the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $249,800 per year, consisting of $0.22 per ton variable cost and $199,800 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 58% of the Transport Services Department's capacity and the Southern Plant requires 42% During the year, the Transport Services Department actually hauled 126,000 tons of ore to the Northern Plant and 60,000 tons to the Southern Piant. The Transport Services Department incurred $364,000 in cost during the year of which $53,300 was variable cost and $310,700 was fixed cost Required: 1. How much of the Transport Services Department's variable costs should be charged to each plant? 2. How much of the $310,700 in fixed cost should be charged to each plant? 3. Should any of the Transport Services Department's actual total cost of $364,000 be treated as a spending variance and not charged to the plants? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required How much of the Transport Services Department's variable costs should be charged to each plant
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