Tasman Products, Ltd., of Australia has a Maintenance Department that services t

Question

Tasman Products, Ltd., of Australia has a Maintenance Department that services the equipment in the company’s Forming Department and Assembly Department. The cost of this servicing is charged to the operating departments on the basis of machine-hours. Cost and other data relating to the Maintenance Department and to the other two departments for the most recent year are presented below.

Machine-Hours

Management would like data to assist in comparing actual performance to planned performance in the Maintenance Department and in the other departments.

How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department?

Compute the amount of the actual Maintenance Department costs that should not be charged to the other departments?

Tasman Products, Ltd., of Australia has a Maintenance Department that services the equipment in the company’s Forming Department and Assembly Department. The cost of this servicing is charged to the operating departments on the basis of machine-hours. Cost and other data relating to the Maintenance Department and to the other two departments for the most recent year are presented below.

Explanation / Answer

Variable Cost Fixed Cost Total Budgeted Maintaenece Cost 345000 191000 536000 Actual Cost in Maintence Department 442500 205100 647600 Variation -111600 Budgeted hours Budgeted Cost per hr Budgeted Variable Cost Actual Hours Budgeted Cost per hr Actual cost as per Budget BudgetedFixed Cost % allocation Budgeted fixed cost of dept Forming Deartment 10100 23 232300 12100 23 278300 64% 122240 191000 Assembly Department 4900 23 112700 3900 23 89700 36% 68760 Total 345000 368000 191000 ActualCost Budgeted Variable Cost Budgeted fixed cost of dept Total Actual cost as per Budget cost per unit Fixed cost Total Variation Forming Deartment 232300 122240 354540 278300 122240 400540 46000 Assembly Department 112700 68760 181460 89700 68760 158460 -23000 Total 345000 191000 536000 368000 191000 559000 23000 Ans 2 The amount f actual maintaence cost that should not be assigned Variable Cost 442500-3680000 74500 Fixed Cost 205100-191000 14100 Total 88600 As this is the excess cost than budgeted so should not be charged to other departments

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