Reference no: EM132971645

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 $158,700 per year, consisting of $0.17 per ton variable cost and $108,700 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 64% of the Transport Services Department's capacity and the Southern Plant requires 36%.

During the year, the Transport Services Department actually hauled 126,000 tons of ore to the Northern Plant and 56,400 tons to the Southern Plant. The Transport Services Department incurred $378,000 in cost during the year, of which $53,100 was variable cost and $324,900 was fixed cost.

Required:

Problem 1. How much of the Transport Services Department's variable costs should be charged to each plant?

Problem 2. How much of the $324,900 in fixed cost should be charged to each plant?

Problem 3. Should any of the Transport Services Department's actual total cost of $378,000 be treated as a spending variance and not charged to the plants?