Question

Calculating and Using a Single Charging Rate

The expected costs for the Maintenance Department of Stazler, Inc., for the coming year include:

Fixed costs (salaries, tools): $78,540 per year

Variable costs (supplies): $1.30 per maintenance hour

Estimated usage by:
Assembly Department	4,800
Fabricating Department	7,000
Packaging Department	11,300
Total maintenance hours	23,100
Actual usage by:
Assembly Department	3,500
Fabricating Department	7,100
Packaging Department	10,500
Total maintenance hours	21,100

Required:

1. Calculate a single charging rate for the Maintenance Department. Round your answer to the nearest cent.
$ per maintenance hour

2. Use this rate to assign the costs of the Maintenance Department to the user departments based on actual usage. Calculate the total amount charged for maintenance for the year.
$

3. What if the Assembly Department used 5,000 maintenance hours in the year? How much would have been charged out to the three departments? When required, round your answers to the nearest dollar.

Assembly Department charge	$
Fabricating Department charge
Packaging Department charge
Total amount charged	$

Answer 1

1. Calculate a single charging rate for the Maintenance Department

Fixed costs	78540
Variable costs : $1.30 x 23100	30030
Total cost	108570

a single charging rate

=Total cost / Machine Hours

=108570 /23100

=$4.70

Rate =$4.70 per maintenance hour

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2.

Use this rate to assign the costs of the Maintenance Department to the user departments based on actual usage. Calculate the total amount charged for maintenance for the year.

Assembly Department	16450
Fabricating Department	33370
Packaging Department	49350
Total	99170

the total amount charged for maintenance for the year =$99170

Working notes for the above answer is as under

	Actual Hours	Rate	Total
	A	B	C=AxB
Assembly Department	3,500	4.7	16450
Fabricating Department	7,100	4.7	33370
Packaging Department	10,500	4.7	49350
Total maintenance hours	21,100		99170

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3.

What if the Assembly Department used 5,000 maintenance hours in the year? How much would have been charged out to the three departments? When required, round your answers to the

Assembly Department	23500
Fabricating Department	33370
Packaging Department	49350
Total	106220

Working notes for the above answer is as under

	Actual Hours	Rate	Total
	A	B	C=AxB
Assembly Department	5,000	4.7	23500
Fabricating Department	7,100	4.7	33370
Packaging Department	10,500	4.7	49350
Total maintenance hours	22,600		106220