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Tasman Products, Ltd., of Australia has a Maintenance Department that services the equipment in the company’s...

Tasman 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 $ 345,000 * $ 442,500
Fixed costs for salaries and other $ 216,000 $ 232,600

*Budgeted at $23 per machine-hour.

Data for the Forming and Assembly Departments follow:

Percentage of
Peak-Period
Capacity Required
Machine-Hours
Budget Actual
Forming Department 75% 9,800 11,800
Assembly Department 25% 5,200 4,200
Total 100% 15,000 16,000

The level of fixed costs in the Maintenance Department is determined by peak-period requirements.

Required:

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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