Handy Inc. has a maintenance department that serves two operating departments, Cutting and Assembly. The maintenance department incurred $154,000 this year of which 30% was variable costs and the rest was fixed. Variable costs are allocated based on $1.25 per machine hour. Fixed costs are spread based on peak-period capacity of 100,000 machine in Cutting and 80,000 machine hours in Assembly. How much of the maintenance department will be charged to Assembly if they used 84,000 machine hours during the year (rounded to whole number)?

Handy Inc. has a maintenance department that serves two operating departments, Cutting and Assembly. The maintenance department incurred $154,000 this year of which 30% was variable costs and the rest was fixed. Variable costs are allocated based on $1.25 per machine hour. Fixed costs are spread based on peak-period capacity of 100,000 machine in Cutting and 80,000 machine hours in Assembly. How much of the maintenance department will be charged to Assembly if they used 84,000 machine hours during the year (rounded to whole number)?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 1CE: The expected costs for the Maintenance Department of Stazler, Inc., for the coming year include:...

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The expected costs for the Maintenance Department of Stazler, Inc., for the coming year include: Fixed costs (salaries, tools): 64,900 per year Variable costs (supplies): 1.35 per maintenance hour Estimated usage by: Actual usage by: Required: 1. Calculate a single charging rate for the Maintenance Department. 2. Use this rate to assign the costs of the Maintenance Department to the user departments based on actual usage. Calculate the total amount charged for maintenance for the year. 3. What if the Assembly Department used 4,000 maintenance hours in the year? How much would have been charged out to the three departments?
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