Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 $307,300 per year, consisting of $0.21 per ton variable cost and $257,300 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 53% of the Transport Services Departments capacity and the Southern Plant requires 47%.

During the year, the Transport Services Department actually hauled the following amounts of ore for the two plants: Northern Plant, 117,000 tons; Southern Plant, 60,300 tons. The Transport Services Department incurred $370,000 in cost during the year, of which $53,500 was variable cost and $316,500 was fixed cost.

Required:

1. How much of the $53,500 in variable cost should be charged to each plant?

2. How much of the $316,500 in fixed cost should be charged to each plant?

3. How much of the $370,000 in the Transport Services Department cost should be treated as a spending variance and not charged to the plants?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditors Letter Handbook

Authors: American Bar Association Business Law Section

2nd Edition

161438973X, 978-1614389736

More Books

Students also viewed these Accounting questions