The Maintenance Department of ABC Corporation provides maintenance services to the company's two operating divisions (Interior...

 

Transcribed Image Text:

The Maintenance Department of ABC Corporation provides maintenance services to the company's two operating divisions (Interior Paint Division and Exterior Paint Division). The Maintenance Department's variable costs are charged to the operating divisions on the basis of number of cased produced, since the company has determined there is a cause-and-effect relationship between actual number of cases produced and Maintenance Department actual total variable costs. The Maintenance Department's fixed costs, on the other hand, are charged to the operating divisions based upon the long-run average needs of the two operating divisions. Data for the year appears below: Maintenance Department Budgeted variable cost $4 per case $693,000 Budgeted total fixed cost Interior Paint Division: Actual number of cases 18,000 Percentage of long-run average needs 30% Exterior Paint Division: Actual number of cases 59,000 70% Percentage of long-run average needs The amount of Maintenance Department costs allocated to each division is important (among other implications, the allocations impact the performance evaluations of the division managers based upon divisional net operating income). Part 1. For performance evaluation purposes, how much Maintenance Department variable costs should be charged to the Interior Paint Division for the year (specify a total dollar amount)? Part 2. For performance evaluation purposes, how much Maintenance Department fixed costs should be charged to the Interior Paint Division for the year (specify a total dollar amount)? The Maintenance Department of ABC Corporation provides maintenance services to the company's two operating divisions (Interior Paint Division and Exterior Paint Division). The Maintenance Department's variable costs are charged to the operating divisions on the basis of number of cased produced, since the company has determined there is a cause-and-effect relationship between actual number of cases produced and Maintenance Department actual total variable costs. The Maintenance Department's fixed costs, on the other hand, are charged to the operating divisions based upon the long-run average needs of the two operating divisions. Data for the year appears below: Maintenance Department Budgeted variable cost $4 per case $693,000 Budgeted total fixed cost Interior Paint Division: Actual number of cases 18,000 Percentage of long-run average needs 30% Exterior Paint Division: Actual number of cases 59,000 70% Percentage of long-run average needs The amount of Maintenance Department costs allocated to each division is important (among other implications, the allocations impact the performance evaluations of the division managers based upon divisional net operating income). Part 1. For performance evaluation purposes, how much Maintenance Department variable costs should be charged to the Interior Paint Division for the year (specify a total dollar amount)? Part 2. For performance evaluation purposes, how much Maintenance Department fixed costs should be charged to the Interior Paint Division for the year (specify a total dollar amount)?