Reference no: EM133535495

Question: 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 $341,200 per year, consisting of $0.16 per ton variable cost and $291,200 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 65% ofthe Transport Services Department's capacity and the Southern Plant requires 35%. During the year, the Transport Services Department actually hauled 128,000 tons of ore to the Northern Plant and 62,400 tons to the Southern Plant. The Transport Services Department incurred $366,000 in cost during the year, of which $52,600 was variable cost and $313,400 was fixed cost.

Required:

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

2. How much of the Transport Services Department's fixed costs should be charged to each plant?

3. How much, if any, of the Transport Services Department's actual total cost of $366,000 should be treated as a spending variance and not charged to the plants?