Answer:
1. Calculate a variable rate for the Maintenance Department. Round your answer to the nearest cent. $ per maintenance hour Calculate the allocated fixed cost for each using department based on its budgeted peak month usage in maintenance hours.
variable rate = $1.30 per maintenance hour
Department Peak Number Allocated
of hours Fixed cost
Assembly (210/2,100) x $65,400 $6,540
Fabrication (1,050/2,100) x $65,400 $32,700
<u>Packaging (840/2,100) x $65,400 $26,160</u>
Total 2,100/2,100 $65,400
2. Use the two rates to assign the costs of the Maintenance Department to the user departments based on actual usage. Calculate the total amount charged for maintenance for the year.
Department Fixed costs Variable cost Total
Assembly $6,540 3,500 x $1.30 = $4,550 $11,090
Fabricating $32,700 7,000 x $1.30 = $9,100 $41,800
<u>Packaging $26,160 10,000 x $1.30 = $13,000 $39,160</u>
Total $65,400 $26,650 $92,050
3. What if the Assembly Department used 3,550 maintenance hours in the year? How much would have been charged out to the three departments?
Department Fixed costs Variable cost Total
Assembly $6,540 3,550 x $1.30 = $4,615 $11,155
Fabricating $32,700 7,000 x $1.30 = $9,100 $41,800
<u>Packaging $26,160 10,000 x $1.30 = $13,000 $39,160</u>
Total $65,400 $26,715 $92,115
