Tasman Products, Limited, of Australia has a Maintenance Department that services the equipment in the companys Forming
Question:
Tasman Products, Limited, of Australia has a Maintenance Department that services the equipment in the company’s 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 $ 364,800* $ 468,240 Fixed costs for salaries and other $ 212,000 $ 228,200 *Budgeted at $24 per machine-hour. Data for the Forming and Assembly Departments follow: Percentage of Peak-Period Capacity Required Machine-Hours Budget Actual Forming Department 70% 10,200 12,200 Assembly Department 30% 5,000 4,000 Total 100% 15,200 16,200 The level of fixed costs in the Maintenance Department is determined by peak-period requirements. Required: 1. How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department? 2. 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?
Tasman Products, Limited, of Australia has a Maintenance Department that services the equipment in the company’s 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 | $ 364,800* | $ 468,240 |
Fixed costs for salaries and other | $ 212,000 | $ 228,200 |
*Budgeted at $24 per machine-hour.
Data for the Forming and Assembly Departments follow:
Percentage of Peak-Period Capacity Required | Machine-Hours | ||
---|---|---|---|
Budget | Actual | ||
Forming Department | 70% | 10,200 | 12,200 |
Assembly Department | 30% | 5,000 | 4,000 |
Total | 100% | 15,200 | 16,200 |
The level of fixed costs in the Maintenance Department is determined by peak-period requirements.
Required:
1. How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department?
2. 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?
Differential Equations and Linear Algebra
ISBN: 978-0131860612
2nd edition
Authors: Jerry Farlow, James E. Hall, Jean Marie McDill, Beverly H. West