Question

The Hudson Block Company has a trucking department that delivers crushed stone from the company's quarry to its two cement block production facilities-the West Plant and the East Plant. Budgeted costs for the trucking department are $340,000 per year in fixed costs and $0.30 per ton variable cost. Last year, 70,000 tons of crushed stone were budgeted to be delivered to the West Plant and 100,000 tons of crushed stone to the East Plant. During the year, the trucking department actually delivered 75,000 tons of crushed stone to the West Plant and 90,000 tons to the East Plant. Its actual costs for the year were $65,000 variable and $350,000 fixed. The level of budgeted fixed costs is determined by peak-period requirements. The West Plant requires 40% of the peak-period capacity and the East Plant requires 60%. The company allocates fixed and variable costs separately.
For performance evaluation purposes, how much fixed trucking department cost should be charged to the West Plant at the end of the year?

$140,000
$204,000
$136,000
$160,000

Answer 1

Answer: $136,000

Explanation:

The question is asking for how much 'fixed trucking department cost should be charged to the west plant'. We know that the budgeted cost for the trucking department is $340,000. This is for both the the production facilities i.e West and East Plant. Since the West Plant requires 40% of the peak-period capacity therefore, we would calculate 40% of the total budget which is $340,000 in order to find out how much fixed cost could be allocated to the West Plant.

$340,000 x 40% = $136,000.