Question

Poole Corporation's Maintenance Department provides services to the company's two operating divisions — the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The fixed costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments during the peak period. Data appear below: Maintenance Department: Budgeted variable cost $ 6 per case Budgeted total fixed cost $ 559,000 Actual total variable cost $ 323,504 Actual total fixed cost $ 562,490 Paints Division: Percentage of peak period capacity required 25% Budgeted cases 16,000 Actual cases 16,040 Stains Division: Percentage of peak period capacity required 75% Budgeted cases 48,000 Actual cases 47,980 For performance evaluation purposes, how much Maintenance Department cost should be charged to the Stains Division at the end of the year?

Answer 1

Maintenance Department cost charged to Stains Division
= (Budgeted variable cost * Actual Cases) + (Budgeted total fixed cost * Percentage of  peak period capacity required)
= ($6 per case × 47,980 cases) + ($559,000 × 25%)= $287,880 + $139,750 = $427,630