Exam 30: Service Department Charges

Lakeside Nursing Home has two operating departments, Custodial Care and Rehabilitation. It also has a Housekeeping Department that serves the two operating departments. The costs of the Housekeeping Department are all variable and are charged to the operating departments on the basis of labor-hours. Data for September follow: The budgeted costs of the Housekeeping Department for September were $24,000 and the actual costs were $29,760. -How much Housekeeping Department cost should be charged to Rehabilitation at the end of September for performance evaluation purposes?

For performance evaluation purposes, actual service department costs instead of budgeted service department costs should be allocated to operating departments.

Rapone 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 budgeted based on the number of cases produced by the operating departments during the peak period. Data appear below: For performance evaluation purposes, how much Maintenance Department cost should be charged to the Paints Division at the end of the year?

Lakeside Nursing Home has two operating departments, Custodial Care and Rehabilitation. It also has a Housekeeping Department that serves the two operating departments. The costs of the Housekeeping Department are all variable and are charged to the operating departments on the basis of labor-hours. Data for September follow: The budgeted costs of the Housekeeping Department for September were $24,000 and the actual costs were $29,760. -How much of the actual Housekeeping Department costs for September should not be charged to the operating departments for performance evaluation purposes?

Fixed costs budgeted for Caterton's Maintenance Department for last year totaled $280,000; actual fixed costs for the year totaled $308,000. The level of budgeted fixed costs is determined by peak-period requirements. The Milling Department requires 15/35 of the peak-period capacity and the Assembly Department requires 20/35. -How much of the actual fixed maintenance cost for the year should be kept in the Maintenance department and not charged to the other departments for performance evaluation purposes?

Gabritz, 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 $7.50 per maintenance hour and actual variable maintenance costs were $7.80 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.

Smurnov Company has a purchasing department that provides services to two factories located in Austin and the other in Belmont. Budgeted costs for the purchasing department consist of $91,000 per year of fixed costs and $7 per purchase order for variable costs. The level of budgeted fixed costs is determined by the peak-period requirements. The Austin factory requires 3/7 of the peak-period capacity and the Belmont factory requires 4/7. During the year, 2,700 purchase orders were processed for the Austin factory and 3,900 purchase orders for the Belmont factory. Required: Compute the amount of purchasing department cost that should be charged to each factory for the year.

Komlos 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 $48 per shipment. The Logistics Department's fixed costs are budgeted at $253,000 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 $360,620 and fixed costs totaled $267,210. The East Division had a total of 4,200 shipments and the West Division had a total of 3,100 shipments for the year. -How much Logistics Department cost should be allocated to the West Division at the end of the year?

Auchmoody Corporation has two operating divisions-a Consumer Division and a Commercial Division. The company's Customer Service Department provides services to both divisions. The variable costs of the Customer Service Department are budgeted at $63 per order. The Customer Service Department's fixed costs are budgeted at $372,600 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 $444,405 and fixed costs totaled $382,900. The Consumer Division had a total of 2,030 orders and the Commercial Division had a total of 4,860 orders for the year. For performance evaluation purposes, how much actual Customer Service Department cost should NOT be charged to the operating divisions at the end of the year?

Szafran 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?

For performance evaluation purposes, the fixed costs of a service department should be charged to operating departments using:

An allocation basis for service department costs should reflect how much cost the operating departments can bear. For this reason, the sales of the operating departments is often a good allocation basis.

Variable service department costs should be charged to operating departments at the end of the period according to the formula:

The medical services department of Carey Company budgeted $20 of variable medical expenses per employee for May, based on 1,000 employees in operating departments. During May an average of 1,050 employees were employed in operating departments. Actual variable medical expenses totaled $23,100 for the month. How much variable medical expenses should be charged to operating departments at the end of May for performance evaluation purposes?