Question

Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel mills-the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $219,400 per year, consisting of $0.18 per ton variable cost and $169,400 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 63% of the Transport Services Department's capacity and the Southern Plant requires 37%. During the year, the Transport Services Department actually hauled the following amounts of ore for the two plants: Northern Plant, 127,000 tons; Southern Plant, 61,300 tons. The Transport Services Department incurred $353,000 in cost during the year, of which $52,600 was variable cost and $300,400 was fixed cost. Required: 1. How much of the $52,600 in variable cost should be charged to each plant? 2. How much of the $300,400 in fixed cost should be charged to each plant? 3. How much of the $353,000 in the Transport Services Department cost should be treated as a spending variance and not charged to the plants? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 How much of the $52,600 in variable cost should be charged to each plant? Variable cost charged to Northern Plant Variable cost charged to Southern Plant ( Required 1 Required 2 >

Answer 1

solution: Required 1 Variable cost charged į = $22,860 to Northern plant variable cost charged = $11,834 : to southern plant Explanation: Northern plant variable cost = $0.18 perton 4 127,000 tons -$22,860 Southern plant variable cost = $8.18 per ton x 61,300 tons. .= $11,034

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