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: Variable costs for lubricants Fixed costs for salaries and other Budget $ 294,000* $210,000 Actual $376,200 $226,000 *Budgeted at $20 per machine-hour. Data for the Forming and Assembly Departments follow: Machine-Hours – Forming Department Assembly Department Total Percentage of Peak-Period Capacity Required 74% 26% 100% Budget 9,900 4,800 14,700 Actual 11,900 3,800 15,700 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.

Answer 1

Answers How muth maintenance Department cost should be changed to the forming Department and to the assembly Department: particulars foaming dept Assimbly Dept Total Actual machine hour (a) 11,900 Budgeted cost / machine hour (6) 20 3,800 76000 314000 264 Variable cost (eaxb) 238000 to os capacity required (d): 746. Allocation of fixed cost [e=210,000xd) 155 400 54600 a 10000 130600 524000 Total maintenance cost (cte) 393400 I Total cost charged =$524,000)

@ @ computation of spending Whiance E cost not charged to department : partment. Particulars variable cost fixed cost / Total Total actual cost incurred $376,200 $ 226,000 602200 fooled cost choroge (as calaudat dabew) 314000 variance & cost not charged to chest 622001 16000 78200 210000 524000 ing variance -7620