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Exam 21: Service Department Charges

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Question 1

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Gabritz,Inc.has a maintenance department that provides services to the company's two operating departments.The variable costs of the maintenance department are charged on the basis of the number of maintenance hours logged in each department.Last year,budgeted variable maintenance costs were $7.50 per maintenance hour and actual variable maintenance costs were $7.80 per maintenance hour. The budgeted and actual maintenance hours for each operating department for last year appear below: Required: a.Compute the amount of variable maintenance department cost that should have been charged to each operating department at the end of the year for performance evaluation purposes. b.Compute the amount of actual variable maintenance department cost that should NOT have been charged to the operating departments at the end of the year for performance evaluation purposes.

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Question 2

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Fox Company has the following data concerning the machine-hours in its operating departments: Fixed costs of the maintenance department are budgeted at $30,000 per year.The fixed maintenance costs are incurred in order to service long-run average demand.The actual fixed maintenance cost was actually $32,000.How much fixed maintenance cost should be charged to Department B at the end of the year for performance evaluation purposes?

A) $12,000
B) $14,400
C) $15,000
D) $18,000

E) A) and D)
F) All of the above

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Question 3

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An allocation basis for service department costs should reflect how much cost the operating departments can bear.For this reason,the sales of the operating departments is often a good allocation basis.

Which of the following would be the least appropriate allocation base to allocate the cost of a human resources department to other departments?

Komlos Corporation has two operating divisions-an East Division and a West Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $48 per shipment.The Logistics Department's fixed costs are budgeted at $253,000 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year,actual Logistics Department variable costs totaled $360,620 and fixed costs totaled $267,210.The East Division had a total of 4,200 shipments and the West Division had a total of 3,100 shipments for the year. -How much actual Logistics Department cost should not be allocated to the operating divisions at the end of the year?

Schaich Corporation's Maintenance Department provides services to the company's two operating divisions-the Paints Division and the Stains Division.The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments.The fixed costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments during the peak period.Data appear below: For performance evaluation purposes,how much Maintenance Department cost should be charged to the Stains Division at the END of the year?

Caruana Corporation's Maintenance Department provides services to the company's two operating divisions-the Paints Division and the Stains Division.The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments.The fixed costs of the Maintenance Department are determined by the number of cases produced by the operating departments during the peak period.Data appear below: -How much Maintenance Department cost should be allocated to the Stains Division at the end of the year?

Derico Corporation has two operating divisions-an Atlantic Division and a Pacific Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $42 per shipment.The Logistics Department's fixed costs are budgeted at $365,800 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year,actual Logistics Department variable costs totaled $388,800 and fixed costs totaled $378,080.The Atlantic Division had a total of 4,700 shipments and the Pacific Division had a total of 4,300 shipments for the year.For performance evaluation purposes,how much actual Logistics Department cost should NOT be charged to the operating divisions at the end of the year?

Auchmoody Corporation has two operating divisions-a Consumer Division and a Commercial Division.The company's Customer Service Department provides services to both divisions.The variable costs of the Customer Service Department are budgeted at $63 per order.The Customer Service Department's fixed costs are budgeted at $372,600 for the year.The fixed costs of the Customer Service Department are determined based on the peak period orders. At the end of the year,actual Customer Service Department variable costs totaled $444,405 and fixed costs totaled $382,900.The Consumer Division had a total of 2,030 orders and the Commercial Division had a total of 4,860 orders for the year.For performance evaluation purposes,how much actual Customer Service Department cost should NOT be charged to the operating divisions at the end of the year?

Boulay Corporation has two operating divisions-a North Division and a South Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $34 per shipment.The Logistics Department's fixed costs are budgeted at $175,000 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year,actual Logistics Department variable costs totaled $147,840 and fixed costs totaled $189,610.The North Division had a total of 2,100 shipments and the South Division had a total of 2,100 shipments for the year. Required: a.Prepare a report showing how much of the Logistics Department's costs should be charged to each of the operating divisions at the end of the year. b.How much of the actual Logistics Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

Fixed costs budgeted for Caterton's Maintenance Department for last year totaled $280,000;actual fixed costs for the year totaled $308,000.The level of budgeted fixed costs is determined by peak-period requirements.The Milling Department requires 15/35 of the peak-period capacity and the Assembly Department requires 20/35. -How much of the actual fixed maintenance cost for the year should be kept in the Maintenance department and not charged to the other departments for performance evaluation purposes?

Fixed costs budgeted for Caterton's Maintenance Department for last year totaled $280,000;actual fixed costs for the year totaled $308,000.The level of budgeted fixed costs is determined by peak-period requirements.The Milling Department requires 15/35 of the peak-period capacity and the Assembly Department requires 20/35. -How much fixed maintenance cost should be charged to the Assembly department at the end of the year for purposes of measuring performance?

Community General Hospital has a Food Services Department that provides meals for all patients in the hospital.Budgeted and actual meals served for the month just ended are: The budgeted variable cost of meals for the month just ended was $100,000;the actual variable cost of meals for the month was $130,000. -How much of the $130,000 actual Food Services cost for the month just completed should be kept in the Food Services Department and not charged to the other departments?

The medical services department of Bantam Company budgeted $20 of variable medical expenses per employee for the year,based on 1,500 employees in the operating departments.During the year,an average of 1,200 employees were employed in operating departments.Actual variable medical expenses totaled $28,800 for the year.How much variable medical expenses should be charged to operating departments at year-end?

Fickling Corporation has two operating divisions-a Consumer Division and a Commercial Division.The company's Order Fulfillment Department provides services to both divisions.The variable costs of the Order Fulfillment Department are budgeted at $51 per order.The Order Fulfillment Department's fixed costs are budgeted at $484,000 for the year.The fixed costs of the Order Fulfillment Department are budgeted based on the peak period orders. At the end of the year,actual Order Fulfillment Department variable costs totaled $460,404 and fixed costs totaled $493,700.The Consumer Division had a total of 2,430 orders and the Commercial Division had a total of 6,390 orders for the year. -How much actual Order Fulfillment Department cost should not be allocated to the operating divisions at the end of the year?

Rapone Corporation's Maintenance Department provides services to the company's two operating divisions-the Paints Division and the Stains Division.The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments.The fixed costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments during the peak period.Data appear below: For performance evaluation purposes,how much Maintenance Department cost should be charged to the Paints Division at the end of the year?

Lakeside Nursing Home has two operating departments,Custodial Care and Rehabilitation.It also has a Housekeeping Department that serves the two operating departments.The costs of the Housekeeping Department are all variable and are charged to the operating departments on the basis of labor-hours.Data for September follow: The budgeted costs of the Housekeeping Department for September were $24,000 and the actual costs were $29,760. -How much of the actual Housekeeping Department costs for September should not be charged to the operating departments for performance evaluation purposes?

Krikorian Corporation has two operating divisions-an Atlantic Division and a Pacific Division.The company's Logistics Department services both divisions.The variable costs of the Logistics Department are budgeted at $37 per shipment.The Logistics Department's fixed costs are budgeted at $330,600 for the year.The fixed costs of the Logistics Department are determined based on peak-period demand. How much Logistics Department cost should be charged to the Altlantic Division at the end of the year for performance evaluation purposes?

The long-run average or peak period needs of operating departments would be the most suitable base for allocating:

Lakeside Nursing Home has two operating departments,Custodial Care and Rehabilitation.It also has a Housekeeping Department that serves the two operating departments.The costs of the Housekeeping Department are all variable and are charged to the operating departments on the basis of labor-hours.Data for September follow: The budgeted costs of the Housekeeping Department for September were $24,000 and the actual costs were $29,760. -How much Housekeeping Department cost should be charged to Rehabilitation at the end of September for performance evaluation purposes?