Question

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): $66,465 per year

Variable costs (supplies): $1.35 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	4,300		600
Fabricating Department	6,300		1,800
Packaging Department	10,500		600
Total maintenance hours	21,100		3,000

Actual usage for the year by:

Assembly Department	3,250
Fabricating Department	6,400
Packaging Department	9,700
Total maintenance hours	19,350

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 3,300 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	$

Answer 1

1. Calculate a variable rate for the Maintenance Department. Round your answer to the nearest cent.
Variable rate =	$         1.35	per maintenance hour
2) 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	%	Budgeted Fixed Cost	Allocated Fixed Cost
Assembly	600	20%	$ 66,465.00	$ 13,293.00
Fabricating	1800	60%	$ 66,465.00	$ 39,879.00
Packaging	600	20%	$ 66,465.00	$ 13,293.00
Total	3000	100%		$ 66,465.00
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.	Actual Number of hours	Variable Rate	Variable Amount	Fixed Amount	Total Charges
Assembly	3,250	$         1.35	$   4,387.50	$ 13,293.00	$ 17,680.50
Fabricating	6,400	$         1.35	$   8,640.00	$ 39,879.00	$ 48,519.00
Packaging	9,700	$         1.35	$ 13,095.00	$ 13,293.00	$ 26,388.00
Total	19,350		$ 26,122.50	$ 66,465.00	$ 92,587.50
3. What if the Assembly Department used 3,300 maintenance hours in the year? How much would have been charged out to the three departments? Round your answers to the nearest dollar.	Actual Number of hours	Variable Rate	Variable Amount	Fixed Amount	Total Charges
Assembly	3,300	$         1.35	$   4,455.00	$ 13,293.00	$ 17,748.00
Fabricating	6,400	$         1.35	$   8,640.00	$ 39,879.00	$ 48,519.00
Packaging	9,700	$         1.35	$ 13,095.00	$ 13,293.00	$ 26,388.00
Total	19,400		$ 26,190.00	$ 66,465.00	$ 92,655.00