Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively. Variable costs per unit do not change with the change in activity base. The reason is that total variable costs positively change in approximate proportion to a change in an activity. That is why variable costs per unit remain the same at any level of output. The variable cost charged to Northern Plant and Southern Plant.

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Answer 1

Question

Chapter 11, Problem 4E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively. Variable costs per unit do not change with the change in activity base. The reason is that total variable costs positively change in approximate proportion to a change in an activity. That is why variable costs per unit remain the same at any level of output.

The variable cost charged to Northern Plant and Southern Plant.

2.

To determine

Introduction: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The fixed costs charged to Northern Plant and Southern Plant.

3.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The amount of spending variance which is not charged to the plants.

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Exercise 11-4 (Algo) Service Department Charges [LO11-4] Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company’s mine to its two steel mills—the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $168,700 per year, consisting of $0.17 per ton variable cost and $118,700 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 57% of the Transport Services Department’s capacity and the Southern Plant requires 43%. During the year, the Transport Services Department actually hauled 116,000 tons of ore to the Northern Plant and 51,500 tons to the Southern Plant. The Transport Services Department incurred $370,000 in cost during the year, of which $53,000 was variable cost and $317,000 was fixed cost. Required: 1. How much of the Transport Services Department’s variable costs should be charged to each plant? 2.…

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Question 1 (Single-rate versus dual-rate methods for allocating support department costs)The Cincinnati power plant that services all manufacturing departments of Eastern MountainEngineering has a budget for the coming year. This budget has been expressed in the following monthlyterms:ManufacturingDepartmentNeeded at Practical CapacityProduction Level (KilowattHoursAverage Expected MonthlyUsage (Kilowatt-Hours)Loretta 13,000 10,000Bently 21,000 9,000Melboum 14,000 10,000Eastmoreland 32,000 11,000Total 80,000 40,000The expected monthly costs for operating the power plant during the budget year are $20,000: $8,000variable and $12,000 fixed.Required:1. Assume that a single cost pool is used for the power plant costs. What budgeted amounts will beallocated to each manufacturing department if:(a) the rate is calculated based on practical capacity and costs are allocated based on practicalcapacity and(b) the rate is calculated based on expected monthly usage and costs are allocated based…

Answer 2

Question

Chapter 11, Problem 4E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively. Variable costs per unit do not change with the change in activity base. The reason is that total variable costs positively change in approximate proportion to a change in an activity. That is why variable costs per unit remain the same at any level of output.

The variable cost charged to Northern Plant and Southern Plant.

2.

To determine

Introduction: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The fixed costs charged to Northern Plant and Southern Plant.

3.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The amount of spending variance which is not charged to the plants.

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Answer 3

Question

Chapter 11, Problem 4E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively. Variable costs per unit do not change with the change in activity base. The reason is that total variable costs positively change in approximate proportion to a change in an activity. That is why variable costs per unit remain the same at any level of output.

The variable cost charged to Northern Plant and Southern Plant.

2.

To determine

Introduction: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The fixed costs charged to Northern Plant and Southern Plant.

3.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The amount of spending variance which is not charged to the plants.

Expert Solution & Answer

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Answer 4

Question

Chapter 11, Problem 4E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively. Variable costs per unit do not change with the change in activity base. The reason is that total variable costs positively change in approximate proportion to a change in an activity. That is why variable costs per unit remain the same at any level of output.

The variable cost charged to Northern Plant and Southern Plant.

2.

To determine

Introduction: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The fixed costs charged to Northern Plant and Southern Plant.

3.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The amount of spending variance which is not charged to the plants.

Expert Solution & Answer

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Answer 5

Chapter 11, Problem 4E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively. Variable costs per unit do not change with the change in activity base. The reason is that total variable costs positively change in approximate proportion to a change in an activity. That is why variable costs per unit remain the same at any level of output.

The variable cost charged to Northern Plant and Southern Plant.

2.

To determine

Introduction: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The fixed costs charged to Northern Plant and Southern Plant.

3.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The amount of spending variance which is not charged to the plants.

Answer 6

Chapter 11, Problem 4E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively. Variable costs per unit do not change with the change in activity base. The reason is that total variable costs positively change in approximate proportion to a change in an activity. That is why variable costs per unit remain the same at any level of output.

The variable cost charged to Northern Plant and Southern Plant.

Answer 7

Chapter 11, Problem 4E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively. Variable costs per unit do not change with the change in activity base. The reason is that total variable costs positively change in approximate proportion to a change in an activity. That is why variable costs per unit remain the same at any level of output.

The variable cost charged to Northern Plant and Southern Plant.

Answer 8

2.

To determine

Introduction: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The fixed costs charged to Northern Plant and Southern Plant.

Answer 9

2.

To determine

Introduction: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The fixed costs charged to Northern Plant and Southern Plant.

Answer 10

3.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The amount of spending variance which is not charged to the plants.

Answer 11

3.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The amount of spending variance which is not charged to the plants.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 11 - Prob. 1Q Ch. 11 - Prob. 2Q Ch. 11 - Prob. 3Q Ch. 11 - Prob. 4Q Ch. 11 - Prob. 5Q Ch. 11 - Prob. 6Q Ch. 11 - Prob. 7Q Ch. 11 - Prob. 8Q Ch. 11 - Prob. 9Q Ch. 11 - Prob. 10Q

Solution Summary: The author explains that variable costs per unit do not change with the change in activity base. Fixed costs are period costs such as rent, interest on loans, and depreciation.

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Chapter 11 Solutions