Question

Boripak 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	$27,500

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?

Answer 1

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Boripk	Cutting	Forming	Painting	Total	Note
Budgeted Hours	3,000.00	7,500.00	4,500.00	15,000.00	A
Budgeted Variable cost				45,000.00	B
Budgeted Fixed cost				27,500.00	C
Total Budgeted cost				72,500.00	D=B+C
OH rate				4.83	E=D/A
Actual Hours	2,870.00	7,490.00	4,350.00	14,710.00	F
OH rate				4.83	See E
Overhead allocated				71,049.3	G=F*E
Actual Variable cost				44,683.00	H
Actual Fixed cost				30,200.00	I
Total Actual cost				74,883.00	J=H+I
Cost should not be charged				3833.7	K=J-G