Delta Railroad Has Two Operating Divisions--Freight and Passenger

Multiple Choice

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?

A) $74,000
B) $0
C) $50,000
D) $60,000