Question

Boripa Company has a Maintenance Department that services the equipment in only three operating departments: Cutting, Forming, and Painting Departments. The cost of this servicing is charged to the operating departments on the basis of machine-hours. Data relating to the Maintenance Department costs are below: Actual Budgeted Variable costs $44,683 $45,000 Fixed costs $30,200 $13,800 Data for the three operating departments follow: Cutting Forming Painting Budgeted Machine-Hours 3,000 7,500 4,500 Actual Machine-Hours 2,870 7,490 4,350 Long-run average Machine-Hours 2,800 7,200 4,000

(Q.) How much, if any, of the actual Maintenance Department costs should NOT be charged to the three operating departments for evaluation purposes?

(A.) $

Answer 1

Variable Cost per unit = Budgeted variable cot/ Budgeted Machine hours	$          3.00	Per Machine Hours
Variable Cost Allocation:
	Cutting	Forming	Painting	Total
Actual Machine Hours	2870	7490	4350
Variable Cost per unit	$          3.00	$           3.00	$           3.00
Allocated Variable Cost	$   8,610.00	$  22,470.00	$  13,050.00	$ 44,130.00
The remaining amounts of variable and fixed costs are variances that should not be allocated
Actual Variable Cost	$ 44,683.00
Less: Amt. of Variable Cost Allocated	$ 44,130.00
Variance -Not Allocated	$      553.00
Actual Fixed Cost	$ 30,200.00
Budgeted Fixed Cost	$ 22,200.00
Variance-  Not Allocated	$   8,000.00
The actual Maintenance Department costs should NOT be charged to the three operating departments for evaluation purposes (8000 + 553)	$   8,553.00