Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Question
Chapter 7, Problem 2CE
1.
To determine
Calculate a variable rate for the maintenance department; compute the allocated fixed cost for each using department based on its budgeted peak month usage in maintenance hours.
2.
To determine
Calculate the total amount charged for maintenance.
3.
To determine
Calculate the total amount charged, if assembly department used 4,000 maintenance hours.
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The cost formula for the maintenance department of Rambo Limited is $19,200 per month plus $7.50 per machine hour used by the
production department.
Required:
a. Calculate the maintenance cost that would be budgeted for a month in which 6,600 machine hours are planned to be used.
b. Prepare an appropriate performance report for the maintenance department assuming that 7,100 machine hours would be used in
the month of May and that the total actual maintenance cost incurred in May was $68,950.
Complete this question by entering your answers in the tabs below.
Required A Required B
Calculate the maintenance cost that would be budgeted for a month in which 6,600 machine hours are planned to be used.
Maintenance cost
The cost formula for the maintenance department of Rainbow Ltd. is $19,400 per month plus $7.70 per machine hour used by the production department.Required:a. Calculate the maintenance cost that would be budgeted for a month in which 6,700 machine hours are planned to be used.
b. Prepare an appropriate performance report for the maintenance department assuming that 7,060 machine hours were actually used in the month of May and that the total maintenance cost incurred was $68,940. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
The expected costs for the Maintenance Department of Stazler, Inc., for the coming year include:
Fixed costs (salaries, tools): $67,260 per year
Variable costs (supplies): $1.45 per maintenance hour
The Assembly and Packaging departments expect to use maintenance hours relatively evenly throughout the year. The Fabricating Department typically uses more maintenance hours in the month of November. Estimated usage in hours for the year and for the peak month is as follows:
Yearlyhours
MonthlyPeak Hours
Assembly Department
5,000
345
Fabricating Department
6,700
1,150
Packaging Department
11,100
805
Total maintenance hours
22,800
2,300
Actual usage for the year by:
Assembly Department
3,750
Fabricating Department
6,800
Packaging Department
10,300
Total maintenance hours
20,850
Required:
1. Calculate a variable rate for the Maintenance Department. Round your answer to the…
Chapter 7 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 7 - Describe the two-stage allocation process for...Ch. 7 - Why must support service costs be assigned to...Ch. 7 - Explain how allocation of support service costs is...Ch. 7 - Prob. 4DQCh. 7 - Explain how allocating support service costs will...Ch. 7 - Prob. 6DQCh. 7 - Explain why it is better to allocate budgeted...Ch. 7 - Why is it desirable to allocate variable costs and...Ch. 7 - Explain why either normal or peak capacity of the...Ch. 7 - Explain why variable bases should not be used to...
Ch. 7 - Prob. 11DQCh. 7 - Explain the difference between the direct method...Ch. 7 - The reciprocal method of allocation is more...Ch. 7 - What is a joint cost? How does it relate to...Ch. 7 - How do joint costs differ from other common costs?Ch. 7 - The expected costs for the Maintenance Department...Ch. 7 - Prob. 2CECh. 7 - Valron Company has two support departments, Human...Ch. 7 - Refer to Cornerstone Exercise 7.3. Now assume that...Ch. 7 - Refer to Cornerstone Exercise 7.3. Now assume that...Ch. 7 - Refer to Cornerstone Exercise 7.3 and solve for...Ch. 7 - Orchard Fresh, Inc., purchases apples from local...Ch. 7 - Refer to Cornerstone Exercise 7.7. Assume that...Ch. 7 - Refer to Cornerstone Exercise 7.7. Assume that...Ch. 7 - A company manufactures three products, L-Ten,...Ch. 7 - Refer to Cornerstone Exercise 7.10. (Round...Ch. 7 - Classify each of the following departments in a...Ch. 7 - Prob. 13ECh. 7 - Identify some possible causal factors for the...Ch. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Prob. 17ECh. 7 - Kumar, Inc., evaluates managers of producing...Ch. 7 - Refer to the data in Exercise 7.18. When the...Ch. 7 - Jasmine Company manufactures both pesticide and...Ch. 7 - Refer to the data in Exercise 7.20. The company...Ch. 7 - Eilers Company has two producing departments and...Ch. 7 - Refer to the data in Exercise 7.22. The company...Ch. 7 - Refer to the data in Exercise 7.22. The support...Ch. 7 - Alomar Company manufactures four products from a...Ch. 7 - Refer to Exercise 7.25 and allocate the joint...Ch. 7 - Pacheco, Inc., produces two products, overs and...Ch. 7 - Minor Co. has a job order cost system and applies...Ch. 7 - A CPA would recommend changing from plantwide...Ch. 7 - A company uses charging rates to allocate service...Ch. 7 - Chester Company provided information on overhead...Ch. 7 - Which of the following statements is true? a. The...Ch. 7 - Biotechtron, Inc., has two research laboratories...Ch. 7 - AirBorne is a small airline operating out of...Ch. 7 - Duweynie Pottery, Inc., is divided into two...Ch. 7 - Macalister Corporation is developing departmental...Ch. 7 - Prob. 37PCh. 7 - Welcome Inns is a chain of motels serving business...Ch. 7 - Sonimad Sawmill, Inc. (SSI), purchases logs from...Ch. 7 - Prob. 40P
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