3 Problem 118-5 Service Department Charges [L011-6 10 points Tasman Products, Lt

Question

3 Problem 118-5 Service Department Charges [L011-6 10 points 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: eBook Variable costs for lubricants Fixed costs for salaries and other $360,000 $462,000 $204,000$219,400 Print "Budgeted at $24 per machine-hour Data for the Forming and Assembly Departments follow Percentage of Peak-Per iod Capacity Required 668 9,600 etua1 11,600 Forming Department Assembly Department Total 5,4004.400 16,000 LoO 15,000 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? 2. How much, if any, of the actual Maintenance Department costs for the year should be treated as a spending variance and not charged to the Forming and Assembly departments? Complete this auestion by entering vour answers in the tabs below. KPrev 3 of 3 N Next

Explanation / Answer

Computation of Total Cost Charged Particular Forming Department Assembly Department Total Variable Cost (a) $278,400 $105,600 $384,000 ($11600*$24) (4400*$24) Fixed Cost (b) $134,640 $69,360 $204,000 ($204000*66%) ($204000*34%) Total Cost Charged (a+b) $413,040 $174,960 $588,000 Computation of Cost not Charged Particular Variable Fixed Total Actual Cost (a) $462,000 $219,400 $681,400 Flexible Budget (b) $384,000 $204,000 $588,000 ( From Sol-1) Cost not Charged (Spending Variance(a-b) $78,000 $15,400 $93,400

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