Service department costs are charged to the operating department to encourage the operating department to make wise and efficient use of the resources of the service department. If these services are provided free of cost, the operating segments would be more inclined toward wasting these resources. The amount of maintenance cost that should be charged to both the departments.

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Chapter 11, Problem 18P

1.

To determine

Introduction:

Service department costs are charged to the operating department to encourage the operating department to make wise and efficient use of the resources of the service department. If these services are provided free of cost, the operating segments would be more inclined toward wasting these resources.

The amount of maintenance cost that should be charged to both the departments.

2.

To determine

Introduction:

Service department costs are charged to the operating department to encourage the operating department to make wise and efficient use of the resources of the service department. If these services are provided free of cost, the operating segments would be more inclined toward wasting these resources.

The value of the actual maintenance department costs to be treated as spending variance (if any).

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