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.

1a. How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department?

1b. 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?

Data for the Maintenance Department follow: Variable costs for lubricants Fixed costs for salaries and other *Budgeted at $20 per machine-hour. Budget $ 298,000* $ 185,000 Actual $ 381,400 $ 198,500 Data for the Forming and Assembly Departments follow: Machine-Hours Percentage of Peak- Period Capacity Required 66% 34% Forming Department Assembly Department Total Budget 9,700 5,200 14,900 Actual 11,700 4,200 15,900 100% Forming Assembly Department Department Total cost charged Spending variance