Tasman Products, Ltd., of Australia has a Maintenance Department that services t
ID: 2480206 • Letter: 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.
Data for the Maintenance Department follow:
Budget
Actual
Variable costs for lubricants
$
380,000
*
$
488,000
Fixed costs for salaries and other
$
181,000
$
194,100
*Budgeted at $25 per machine-hour.
Data for the Forming and Assembly departments follow:
Percentage of
Peak-Period
Capacity Required
Machine-Hours
Budget
Actual
Forming Department
60%
9,800
11,800
Assembly Department
40%
5,400
4,400
Total
100%
15,200
16,200
The level of fixed costs in the Maintenance Department is determined by peak-period requirements.
Required:
Management would like data to assist in comparing actual performance to planned performance in the Maintenance Department and in the other departments.
1.
How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department?
Forming Department
Assembly Department
Total
Variable costs
0
Fixed costs
0
Total cost charged
0
0
0
2.
Compute the amount of the actual Maintenance Department costs that should not be charged to the other departments?
Variable Cost
Fixed Cost
Total
Cost not charged (spending variance)
0
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
Forming Department Assembly Department Total Variable costs .25 per machine per hour *11800 2,950.00 .25 per machine per hour *4400 1,100.00 4,050.00 Fixed costs 60%*181000 108,600.00 40%*181000 72,400.00 181,000.00 Total cost charged Actual fixed overhead - Budgeted fixed overhead = Fixed overhead spending variance 194100-181000 13,100.00 Actual hours worked x (Actual overhead rate - standard overhead rate) Variable overhead spending variance 16200*(30.12-25) 82,944.00 Actual cost 488,000.00 Actual hours 16,200.00 Rate per hour 30.12
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