Exam 23: Service Department Charges

(Appendix 12B)The Hudson Block Company has a trucking department that delivers crushed stone from the company's quarry to its two cement block production facilities-the West Plant and the East Plant.Budgeted costs for the trucking department are $340, 000 per year in fixed costs and $0.30 per ton variable cost.Last year, 70, 000 tons of crushed stone were budgeted to be delivered to the West Plant and 100, 000 tons of crushed stone to the East Plant.During the year, the trucking department actually delivered 75, 000 tons of crushed stone to the West Plant and 90, 000 tons to the East Plant.Its actual costs for the year were $65, 000 variable and $350, 000 fixed.The level of budgeted fixed costs is determined by peak-period requirements.The West Plant requires 40% of the peak-period capacity and the East Plant requires 60%.The company allocates fixed and variable costs separately. For performance evaluation purposes, how much fixed trucking department cost should be charged to the West Plant at the end of the year?

(Appendix 12B)The medical services department of Bantam Company budgeted $20 of variable medical expenses per employee for the year, based on 1, 500 employees in the operating departments.During the year, an average of 1, 200 employees were employed in operating departments.Actual variable medical expenses totaled $28, 800 for the year.How much variable medical expenses should be charged to operating departments at year-end?

(Appendix 12B)If a portion of the actual cost incurred by a service department is not charged to operating departments, then at the end of the period, this uncharged cost should be:

(Appendix 12B)Sheinberg Corporation has two operating divisions-a Consumer Division and a Commercial Division.The company's Order Fulfillment Department provides services to both divisions.The variable costs of the Order Fulfillment Department are budgeted at $73 per order.The Order Fulfillment Department's fixed costs are budgeted at $425, 000 for the year.The fixed costs of the Order Fulfillment Department are budgeted based on the peak-period orders. At the end of the year, actual Order Fulfillment Department variable costs totaled $635, 485 and fixed costs totaled $443, 380.The Consumer Division had a total of 2, 340 orders and the Commercial Division had a total of 6, 190 orders for the year. How much actual Order Fulfillment Department cost should not be allocated to the operating divisions at the end of the year?

(Appendix 12B)For performance evaluation purposes, any variance between budgeted fixed costs and actual fixed costs in a service department:

(Appendix 12B)Budgeted fixed costs in Swasey company's Maintenance Department were $180, 000;actual fixed costs in the department for the year were $186, 000.The level of budgeted fixed costs in the Maintenance Department depends on peak-period requirements.The Milling Department requires one-third of the peak-period capacity and the Assembly Department requires two-thirds of peak-period capacity. How much fixed Maintenance Department cost should be charged to the Assembly Department at the end of the year?

(Appendix 12B)For performance evaluation purposes, any variance over budgeted fixed costs in a service department should be charged to the departments that use the service.

(Appendix 12B)For performance evaluation purposes, the lump-sum amount of fixed service department costs charged to an operating department should usually be based on either the operating department's peak-period or long-run average needs.

(Appendix 12B)Larubbio Corporation has two operating divisions-an Inland Division and a Coast Division.The company's Customer Service Department provides services to both divisions.The variable costs of the Customer Service Department are budgeted at $23 per order.The Customer Service Department's fixed costs are budgeted at $407, 100 for the year.The fixed costs of the Customer Service Department are determined based on the peak-period orders. At the end of the year, actual Customer Service Department variable costs totaled $168, 560 and fixed costs totaled $426, 700.The Inland Division had a total of 2, 110 orders and the Coast Division had a total of 4, 770 orders for the year. Required: a.Prepare a report showing how much of the Customer Service Department's costs should be charged to each of the operating divisions at the end of the year. b.How much of the actual Customer Service Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

(Appendix 12B)Brosnan Corporation has two operating divisions-a North Division and a South Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $39 per shipment.The Logistics Department's fixed costs are budgeted at $242, 000 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year, actual Logistics Department variable costs totaled $245, 830 and fixed costs totaled $247, 360.The North Division had a total of 3, 300 shipments and the South Division had a total of 2, 800 shipments for the year. Required: a.Prepare a report showing how much of the Logistics Department's costs should be charged to each of the operating divisions at the end of the year. b.How much of the actual Logistics Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

(Appendix 12B)Vancuren Corporation has two operating divisions-an East Division and a West Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $31 per shipment.The Logistics Department's fixed costs are budgeted at $274, 400 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year, actual Logistics Department variable costs totaled $215, 820 and fixed costs totaled $294, 690.The East Division had a total of 3, 200 shipments and the West Division had a total of 3, 400 shipments for the year. How much Logistics Department cost should be allocated to the West Division at the end of the year?

(Appendix 12B)Plaut Corporation has two operating divisions-a Consumer Division and a Commercial Division.The company's Order Fulfillment Department provides services to both divisions.The variable costs of the Order Fulfillment Department are budgeted at $55 per order.The Order Fulfillment Department's fixed costs are budgeted at $403, 200 for the year.The fixed costs of the Order Fulfillment Department are determined based on the peak-period orders. At the end of the year, actual Order Fulfillment Department variable costs totaled $409, 528 and fixed costs totaled $422, 330.The Consumer Division had a total of 1, 730 orders and the Commercial Division had a total of 5, 480 orders for the year.For purposes of evaluation performance, how much Order Fulfillment Department cost should be charged to the Commercial Division at the end of the year?

(Appendix 12B)Grimwood 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 determined by the number of cases produced by the operating departments during the peak-period.Data appear below: How much actual Maintenance Department cost should not be allocated to the operating divisions at the end of the year?

(Appendix 12B)Sales dollars is generally a poor base to use in allocating service department costs.

(Appendix 12B)Budgeted fixed costs in Swasey company's Maintenance Department were $180, 000;actual fixed costs in the department for the year were $186, 000.The level of budgeted fixed costs in the Maintenance Department depends on peak-period requirements.The Milling Department requires one-third of the peak-period capacity and the Assembly Department requires two-thirds of peak-period capacity. How much fixed Maintenance Department cost should be charged to the Milling Department at year-end?

(Appendix 12B)Henry Company has an Equipment Services department which performs all needed maintenance work on the equipment in the company's Fabrication and Assembly departments.Costs of the Equipment Services department are charged to the Fabrication and Assembly departments on the basis of direct labor-hours.Data on direct labor-hours for the most recent year follow: The company budgeted its variable maintenance costs at $16, 200 for the year.Actual variable maintenance costs totaled $22, 800. For performance evaluation purposes, how much (if any)of the actual variable maintenance cost should not be allocated to the Fabrication and Assembly Departments at the end of the year?

(Appendix 12B)Delta Railroad has two operating divisions-Freight and Passenger.The Maintenance Department serves both divisions.Variable Maintenance Department costs are budgeted at $12 per thousand miles.The fixed Maintenance Department costs are budgeted at $800, 000 per year.The level of the fixed Maintenance Department costs are determined by the peak-period requirements.Data for last year follow: During last year, the Maintenance Department actually incurred $650, 000 in variable costs and $815, 000 in fixed costs. For performance evaluation purposes, how much of the Maintenance Department's actual variable costs should be retained in that department as a spending variance?

(Appendix 12B)Charlie Company has provided the following data concerning power consumption in the company's two operating departments: The company has a Power Services department which provides electrical power for the operating departments.Fixed costs in Power Services are budgeted at $300, 000 for the year and are incurred in order to support peak-period power requirements.How much of this cost should be charged to Department 1?

(Appendix 12B)Delta Railroad has two operating divisions-Freight and Passenger.The Maintenance Department serves both divisions.Variable Maintenance Department costs are budgeted at $12 per thousand miles.The fixed Maintenance Department costs are budgeted at $800, 000 per year.The level of the fixed Maintenance Department costs are determined by the peak-period requirements.Data for last year follow: During last year, the Maintenance Department actually incurred $650, 000 in variable costs and $815, 000 in fixed costs. For performance evaluation purposes, how much of the Maintenance Department's actual fixed costs should be retained in that department as a spending variance?

(Appendix 12B)Hosang Corporation has two operating divisions-an Atlantic Division and a Pacific Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $32 per shipment.The Logistics Department's fixed costs are budgeted at $243, 000 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand. How much Logistics Department cost should be charged to the Atlantic Division at the end of the year?