Business, 17.04.2020 15:49 jukesjameson12
Asman Products, Ltd., of Australia has a Maintenance Department that services the equipment in the company’s Forming Department and Assembly Department. The cost of this servicing is charged to the operating departments on the basis of machine-hours. Cost and other data relating to the Maintenance Department and to the other two departments for the most recent year are presented below.
Data for the Maintenance Department follow:
Budget Actual
Variable costs for lubricants $ 367,200 * $ 471,360
Fixed costs for salaries and other $ 220,000 $ 237,000
*Budgeted at $24 per machine-hour.
Data for the Forming and Assembly Departments follow:
Percentage of
Peak-Period
Capacity Required Machine-Hours
Budget Actual
Forming Department 73% 10,200 12,200
Assembly Department 27% 5,100 4,100
Total 100% 15,300 16,300
The level of fixed costs in the Maintenance Department is determined by peak-period requirements.
Required:
Management would like data to assist in comparing actual performance to planned performance in the Maintenance Department and in the other departments.
1. How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department?
2. How much, if any, of the actual Maintenance Department costs for the year should be treated as a spending variance and not charged to the Forming and Assembly departments?
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