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Problem - A company has a service department which allocates its costs to two operating departments D and L. Variable costs of the service department are based on the number of cases produced and fixed costs are determined based on peak period demand requirements. For the most recent period:
Service Department
Budget
Actual
Total Variable Cost
$400,000
$416,626
Total Fixed Cost
$720,000
$732,960
Operating Departments
Cases Produced
% Peak Period Capacity Required
Operating Department D
23,000
23,020
35%
Operating Department L
57,000
56,960
65%
Required - How much of the actual service department costs would not be charged to the operating departments for this period?
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