Reference no: EM131651138

Question - Tasman Products, Ltd., of Australia has a Maintenance Department that services the equipment in the company's Forming Department and Assembly Department. The cost of this servicing is charged to the operating departments on the basis of machine-hours. Cost and other data relating to the Maintenance Department and to the other two departments for the most recent year are presented below.

Data for the Maintenance Department follow:

	Budget	Actual
Variable costs for lubricants	$96,000*	$110,000
Fixed costs for salaries and other	$150,000	$153,000

*Budgeted at $0.40 per machine-hour.

Data for the Forming and Assembly departments follow:

	Percentage of Peak-Period Capacity Required	Machine-Hours
		Budget	Actual
Forming Department	70%	160,000	190,000
Assembly Department	30%	80,000	70,000
Total	100%	240,000	260,000

The level of fixed costs in the Maintenance Department is determined by peak-period requirements.

Required: Management would like data to assist in comparing actual performance to planned performance in the Maintenance Department and in the other departments.

1. How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department?

	Forming Department	Assembly Department	Total
Variable costs	76,000	28,000	104,000
Fixed costs	105,000	45,000	150,000
Total cost charged	181,000	73,000	254,000

2. Compute the amount of the actual Maintenance Department costs that should not be charged to the other departments?

	Variable cost	Fixed cost	Total
Cost not charged (spending variance)		3,000	3,000