Asked by Kylee Israelsen on May 18, 2024
Verified
Mangiamele Corporation's Maintenance Department provides services to the company's two operating divisions-the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The fixed costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments during the peak period. Data appear below: For performance evaluation purposes, how much Maintenance Department cost should be charged to the Paints Division at the end of the year?
A) $234,000
B) $500,500
C) $279,900
D) $300,300
Maintenance Department
A segment within a company responsible for the upkeep and repair of equipment, ensuring that operations run smoothly and efficiently.
Variable Costs
Costs that vary directly with the level of production or sales, such as materials and labor.
Fixed Costs
Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance.
- Appreciate the value and tactics for apportioning fixed and variable costs among operating divisions for performance scrutiny.
- Measure and analyze the impact of actual versus anticipated expenses and operations on departmental fees.
Verified Answer
Maintenance Department cost = Total variable costs + (Fixed costs / Total number of cases produced during peak period) x Number of cases produced by the Paints Division
Total variable costs = $200,000
Fixed costs = $500,000
Total number of cases produced during peak period = 50,000
Number of cases produced by the Paints Division = 30,000
Maintenance Department cost = $200,000 + ($500,000 / 50,000) x 30,000
Maintenance Department cost = $200,000 + $300,000
Maintenance Department cost = $500,000
Therefore, the Maintenance Department cost that should be charged to the Paints Division is $279,900 (i.e. 30,000/50,000 x $500,000). The correct answer is C.
Learning Objectives
- Appreciate the value and tactics for apportioning fixed and variable costs among operating divisions for performance scrutiny.
- Measure and analyze the impact of actual versus anticipated expenses and operations on departmental fees.
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