Question
Tasman Products, Limited, of Australia has a Maintenance Department that services the equipment in the companys Forming Department and Assembly Department. The cost of this
Tasman Products, Limited, of Australia has a Maintenance Department that services the equipment in the companys Forming Department and Assembly Department. The cost of this servicing is charged to the operating departments on the basis of machine-hours. Cost and other data relating to the Maintenance Department and to the other two departments for the most recent year are presented below.
Data for the Maintenance Department follow:
Budget | Actual | |
---|---|---|
Variable costs for lubricants | $ 347,300* | $ 445,490 |
Fixed costs for salaries and other | $ 181,000 | $ 194,100 |
*Budgeted at $23 per machine-hour.
Data for the Forming and Assembly Departments follow:
Percentage of Peak-Period Capacity Required | Machine-Hours | ||
---|---|---|---|
Budget | Actual | ||
Forming Department | 60% | 10,100 | 12,100 |
Assembly Department | 40% | 5,000 | 4,000 |
Total | 100% | 15,100 | 16,100 |
The level of fixed costs in the Maintenance Department is determined by peak-period requirements.
Required:
How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department?
|
How much, if any, of the actual Maintenance Department costs for the year should be treated as a spending variance and not charged to the Forming and Assembly departments?
|
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