1. Calculating and Using Dual Charging Rates

   The expected costs for the Maintenance Department of Stazler, Inc., for the coming year include:

   Fixed costs (salaries, tools): $67,405 per year

   Variable costs (supplies): $1.45 per maintenance hour

   The Assembly and Packaging departments expect to use maintenance hours relatively evenly throughout the year. The Fabricating Department typically uses more maintenance hours in the month of November. Estimated usage in hours for the year and for the peak month is as follows:

   	Yearly hours	Monthly Peak Hours
   Assembly Department	4,900		250
   Fabricating Department	6,300		1,500
   Packaging Department	10,900		750
   Total maintenance hours	22,100		2,500

   Actual usage for the year by:

   Assembly Department	3,750
   Fabricating Department	6,400
   Packaging Department	10,100
   Total maintenance hours	20,250

   Required:

   1. Calculate a variable rate for the Maintenance Department. Round your answer to the nearest cent. $ per maintenance hour

   Calculate the allocated fixed cost for each using department based on its budgeted peak month usage in maintenance hours. Round your answers to the nearest dollar.

   Department	Peak Number of Hours	Allocated Fixed Cost
   Assembly		$
   Fabricating
   Packaging
   Total		$

   2. Use the two rates to assign the costs of the Maintenance Department to the user departments based on actual usage. Calculate the total amount charged for maintenance for the year. Round your answers to the nearest dollar.

   Assembly	$
   Fabricating
   Packaging
   Total	$

   3. What if the Assembly Department used 3,800 maintenance hours in the year? How much would have been charged out to the three departments? Round your answers to the nearest dollar.

   Assembly	$
   Fabricating
   Packaging
   Total	$

   Feedback

   1. Variable rate is based on budgeted usage. See Cornerstone 7.2 for an example of how to calculate the allocated fixed cost for each department.

   2. Fixed support department costs are allocated on the basis of original capacity. See Cornerstone 7.2.

   3. Calculate as in Requirement 2 and change the Assembly Department's usage to 3,800.

   Needs Instructor Grading.

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