. The maintenance department\'s costs are allocated to other departments based o
ID: 2388340 • Letter: #
Question
. The maintenance department's costs are allocated to other departments based on the number of hours of maintenance use by each department. The maintenance department has fixed costs of $500,000 and variable costs of $30 per hour of maintenance provided. The variable costs include the salaries of the maintenance workers. More maintenance workers can be added if greater maintenance is demanded by the other departments without affecting the fixed costs of the maintenance department. The maintenance department expects to provide 10,000 hours of maintenance. a. What is the application rate for the maintenance department? b. What is the additional cost to the maintenance department of providing another hour of maintenance? c. What problem exists if the managers of other departments can choose how much maintenance to be performed? d. What problem exists if the other departments are allowed to go outside the organization to buy maintenance services?Maintenance Dept [hours] Total
Fixed cost $500,000
Variable cost $30 per hour 10,000 $300,000
a. What is the application rate for the maintenance department?
b. What is the additional cost to the maintenance department of providing another hour of maintenance?
c. What problem exists if the managers of other departments can choose how much maintenance to be performed?
Explanation / Answer
fixed is 5,00,000$ a) 10000x30$ gives 300,000$ so including fixed rate app rate becomes 800,000$ b) 30$ for another extra hour c) if other department managers choose the maintenance to be performed then there arises a problem of money spent a lot which leads to additional costs d) if the other departments are allowed to go outside for maintenance services then there will be a issue of extra charges for them like commission etc besides these maintenance costs
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