Exam 26: Service Department Charges

Boudrie 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 Maintenance Department cost should be allocated to the Stains Division at the end of the year?

Lindon Hospital has a Food Services Department that provides meals for all patients in the hospital. Budgeted and actual meals served for June follow: The budgeted variable cost of meals for June was $75,000; the actual variable cost of meals for the month was $97,500. -How much Food Services cost should be charged to the Surgical Department at the end of June for performance evaluation purposes?

Higuera 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 $28 per order. The Order Fulfillment Department's fixed costs are budgeted at $280,800 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 $152,810 and fixed costs totaled $286,580. The Consumer Division had a total of 1,720 orders and the Commercial Division had a total of 3,460 orders for the year. -How much Order Fulfillment Department cost should be allocated to the Commercial Division at the end of the year?

Fairview Hospital has a Food Services department that provides food for patients in all other departments of the hospital.For May,variable food costs were budgeted at $3 per meal,based on 15,000 meals served during the month.At the end of the month,it was determined that 16,000 meals had been served at a total cost of $54,000.How much food cost should be charged to the other departments at the end of the month?

Leslie Company operates a cafeteria for the benefit of its employees.The company subsidizes the cafeteria heavily by allowing employees to purchase meals at greatly reduced prices.Budgeted and actual costs in the cafeteria for the year just ended are as follows: *Unrecovered cost after deducting amounts received from employees. Costs of the cafeteria are charged to producing departments on the basis of the number of employees in these departments.Fixed costs are charged on the basis of the peak-period number of employees.Data on employees in the company's producing departments follows: Required: a.Compute the dollar amount of variable and fixed costs that should be charged to each of the producing departments at the end of the year for purposes of evaluating performance. b.Identify the amount,if any,of actual costs that should not be charged to the operating departments.

For performance evaluation purposes,the best way to charge the fixed costs of a service department to operating departments is with an allocation base such as direct labor-hours that reflects the actual level of activity for the period.

Janner 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 $79 per order.The Order Fulfillment Department's fixed costs are budgeted at $302,500 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 $446,016 and fixed costs totaled $320,930.The Consumer Division had a total of 1,540 orders and the Commercial Division had a total of 3,980 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?

Trenron,Inc.has a maintenance department that provides services to the company's two operating departments.The variable costs of the maintenance department are charged on the basis of the number of maintenance hours logged in each department.Last year,budgeted variable maintenance costs were $8.60 per maintenance hour and actual variable maintenance costs were $8.75 per maintenance hour. The budgeted and actual maintenance hours for each operating department for last year appear below: Required: a.Compute the amount of variable maintenance department cost that should have been charged to each operating department at the end of the year for performance evaluation purposes. b.Compute the amount of actual variable maintenance department cost that should not have been charged to the operating departments at the end of the year for performance evaluation purposes.

Herriott 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 $43 per shipment.The Logistics Department's fixed costs are budgeted at $209,000 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 $246,960 and fixed costs totaled $217,870.The Atlantic Division had a total of 3,000 shipments and the Pacific Division had a total of 2,600 shipments for the year.For performance evaluation purposes,how much actual Logistics Department cost should NOT be charged to the operating divisions at the end of the year?

Piedmont Company has one service department and three operating departments.During a particular year,a substantial variance developed between the actual costs and the budgeted costs of the service department.For performance evaluation purposes,the variance should be:

Warehouse Services is a service department in the Werner Company,providing storage service to three operating departments.The company charges the costs of this department to operating departments on the basis of cubic feet occupied. Last year,Warehouse Services budgeted variable storage cost of $0.15 per cubic foot occupied.The budgeted total fixed cost was $120,000,and was determined by the long-term storage needs of the operating departments.Actual storage space occupied during the year,along with long-term storage needs of operating departments,is given below: Actual variable storage costs amounted to $0.16 per cubic foot occupied.Actual fixed storage costs were $123,000. Required: a.Compute the amount of variable storage cost that should be charged to each operating department at the end of the year for performance evaluation purposes. b.Compute the amount of fixed storage cost that should be charged to each operating department at the end of the year for performance evaluation purposes.

Lindon Hospital has a Food Services Department that provides meals for all patients in the hospital. Budgeted and actual meals served for June follow: The budgeted variable cost of meals for June was $75,000; the actual variable cost of meals for the month was $97,500. -How much of the actual Food Services cost for June should be kept in the Food Services Department and not be charged to the other departments for performance evaluation purposes?

Lindon Hospital has a Food Services Department that provides meals for all patients in the hospital. Budgeted and actual meals served for June follow: Gunnison Foods has two operating departments, Processing and Packaging. It also has a Housekeeping Department that serves the two operating departments. The costs of the Housekeeping Department are all variable and are allocated to the operating departments on the basis of the number of employees. Data for last year follow: The budgeted costs of the Housekeeping Department were $40,800 and the actual costs were $44,980. The budgeted variable cost of meals for June was $75,000; the actual variable cost of meals for the month was $97,500. -How much Housekeeping Department cost should have been charged to Packaging at the end of last year for performance evaluation purposes?

The fixed costs of Baxter Company's personnel department are allocated to operating departments on the basis of direct labor-hours.The following data have been provided: The fixed costs of the personnel department are budgeted at $56,000 per year and are incurred in order to support long-run average requirements.How much of this fixed cost should be charged to Operating Department X at the end of the year for performance evaluation purposes?

Fixed costs budgeted for Caldwell Company's Maintenance Department for the year totaled $480,000; actual fixed costs for the year totaled $510,000. The level of budgeted fixed costs is determined by peak-period requirements. The Milling Department requires 1/3 of the peak-period capacity and the Assembly Department requires 2/3. -How much of the actual fixed maintenance cost for the year should be kept in the Maintenance Department and not allocated to the other departments for performance evaluation purposes?

The Juab Company has a Freight Department that delivers scrap metal from salvage yards to its two fabricating facilities--the Emory Plant and the Salina Plant. Operating data for the two plants for last year follow: Budgeted costs consist of $150,000 fixed costs and $0.50 variable cost for each ton of scrap delivered to the plants. Actual costs incurred in the Freight Department were $52,800 variable, and $165,000 fixed. Juab allocates variable and fixed service department costs separately. The level of budgeted fixed costs is determined by peak-period needs. The Emory Plant requires 40% of the peak-period capacity and the Salina Plant requires 60%. -How much fixed Freight Department costs should be charged to the Emory Plant at the end of the year for performance evaluation purposes?

Wilson Company maintains a cafeteria for its employees.For June,variable food costs were budgeted at $45 per employee based on a budgeted level of 200 employees in other departments.During the month,an average of 190 employees worked in other departments and actual food costs totaled $9,250.How much food cost should be charged to the other departments at the end of the month for performance evaluation purposes?

Kosek 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 based on the number of cases produced by the operating departments during the peak period.Data appear below: Required: a.Prepare a report showing how much of the Maintenance Department's costs should be charged to each of the operating divisions at the end of the year. b.How much of the actual Maintenance 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?

Since service departments do not engage in production,there can be no variances in service department costs.

All of a service department's actual costs should be allocated or charged to operating departments to ensure that they are fully recovered.