The Downstate Block Company has a trucking department that delivers crushed stone from the company's quarry to its two cement block production facilities-the West Plant and the East Plant. Budgeted costs for the trucking department are $700,000 per year in fixed costs and $0.50 per ton variable cost. Last year, 75,000 tons of crushed stone were budgeted to be delivered to the West Plant and 90,000 tons of crushed stone to the East Plant. During the year, the trucking department actually delivered 74,000 tons of crushed stone to the West Plant and 92,000 tons to the East Plant. Its actual costs for the year were $81,000 variable and $708,000 fixed. The level of budgeted fixed costs is determined by peak-period requirements. The West Plant requires 45% of the peak-period capacity and the East Plant requires 55%. The company allocates fixed and variable costs separately.For performance evaluation purposes, how much of the actual trucking department cost should not be charged to the plants at the end of the year?

A) $10,000
B) $6,000
C) $0
D) $8,000

Question

Jennifer Parrish · Accepted Answer

Final Answer : B, Explanation :  Fixed costs for West Plant = $700,000 x 45% = $315,000Fixed costs for East Plant = $700,000 x 55% = $385,000Total budgeted fixed costs = $315,000 + $385,000 = $700,000Total budgeted variable costs = ($0.50 per ton x 75,000 tons) + ($0.50 per ton x 90,000 tons) = $82,500Actual fixed costs = $708,000Actual variable costs = $81,000The actual total cost of the trucking department is $708,000 + $81,000 = $789,000.To determine how much of the actual trucking department cost should not be charged to the plants, we need to compare the actual costs to the budgeted costs:Budgeted total cost = $700,000 + $82,500 = $782,500Actual total cost = $789,000The difference between the actual and budgeted costs is $6,500. This amount should not be charged to the plants at the end of the year. Therefore, the correct answer is B) $6,000.

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