Question

Problem 11B-5 Service Department Charges (LO11-6) Tasman Products, Ltd., of Australia has a Maintenance Department that services the equipment in the company's Forming Departmer and Assembly Department. The cost of this servicing is charged to the operating departments on the basis of machine-hours. Cost ar 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 Variable costs for lubricants Fixed costs for salaries and other Budget $300,300 $197.000 Actual $384,390 $211,700 "Budgeted at $21 per machine-hour. Data for the Forming and Assembly Departments follow: Percentage of Machine Hours Peak Period - Capacity Required Budget Actual 9,500 11,500 26 4.800 3,800 100% 14.300 15.300 Forming Department Assembly Department Total 741 The level of fixed costs in the Maintenance Department is determined by peak period requirements. Required: Management would like data to assist in comparing actual performance to planned performance in the Maintenance Department and in the other departments. 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? Complete this question by entering your answers in the tabs below. Required 1 Required 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? Spending variance 77.789 < Required 1 Required 2 )

Answer 1

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Part 1
	Forming Department	Assembly Department	Total
Variable costs:
$21 per machine-hour × 11,500 machine-hours Actual	$                                241,500
$21 per machine-hour × 3,800 machine-hours Actual		$                                      79,800	$   321,300
Fixed costs:
74% × $197,000 Budgeted	$                                145,780
26% × $197,000 Budgeted		$                                      51,220	$   197,000
Total cost charged	$                                387,280	$                                    131,020	$   518,300
Part 2
	Variable Cost	Fixed Cost	Total
Actual cost incurred during the year	$                                384,390	$                                    211,700	$   596,090
Cost charged (above)	$                                387,280	$                                    131,020	$   518,300
Cost not charged (spending variance)	$                                   (2,890)	$                                      80,680	$      77,790