lomework Hannibal Steel Company has a Transport Services Department that provide
ID: 2401210 • Letter: L
Question
lomework 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 $273,700 per year, consisting of $0.21 per ton variable cost and $223,700 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 55% of the Transport Services Department's capacity and the Southern Plant requires 45% During the year, the Transport Services Department actually hauled the following amounts of ore for the two plants: Northern Plant, 129,000 tons; Southern Plant, 52.400 tons. The Transport Services Department incurred $362,000 in cost during the year, of which $52,400 was variable cost and $309,600 was fixed cost Required 1. How much of the $52,400 in variable cost should be charged to each plant? 2. How much of the $309,600 in fixed cost should be charged to each plant? 3. How much of the $362,000 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. How much of the $52,400 in variable cost should be charged to each plant? cost charged to N Variable cost charged to Southern Plant Required 2>Explanation / Answer
SOLUTION
(A) Variable cost charged to Northern plant = Northern plant tons * Variable costs per unit
= 129,000 * $0.21 =$27,090
Variable cost charged to Southern plant = Southern plant tons * Variable costs per unit
= 52,400 * $0.21 =$11,004
Total = $27,090+$11,004 = $38,094
(B) Fixed cost charged to Northern plant =Fixed costs * 55%
= $223,700 * 55% = $123,035
Fixed cost charged to Southern plant =Fixed costs * 55%
= $223,700 * 45% = $100,665
(C) Part of the $362,000 in total cost will not be charged to the plants and is computed as follows-
Variable costs ($) Fixed costs ($) Total ($) Total actual costs incurred 52,400 309,600 362,000 Total charges (Calculated above) 38,094 223,700 261,794 Spending variance 14,306 85,900 100,206Related Questions
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