(Appendix 12B)Delta Company's long-run average and actual machine-hours for last year appear below: Fixed maintenance costs of the company's maintenance service department are budgeted at $60, 000 per year.These fixed costs are incurred in order to support long-run average demand.How much of this cost should be charged to Department B at the end of the year?
A)$30, 000
B)$22, 500
C)$24, 000
D)$18, 000

Question

(Appendix 12B)Delta Company's long-run average and actual machine-hours for last year appear below:  Fixed maintenance costs of the company's maintenance service department are budgeted at $60, 000 per year.These fixed costs are incurred in order to support long-run average demand.How much of this cost should be charged to Department B at the end of the year?
A)$30, 000 
B)$22, 500 
C)$24, 000 
D)$18, 000

Quizplus · Accepted Answer

Percentage of long-run average costs attributed to Department B = 20, 000 machine-hours ÷ (30, 000 machine-hours + 20, 000 machine-hours)= 40%
Fixed costs charged to Department B = $60, 000 × 40% = $24, 000

(Appendix 12B)Delta Company's Long-Run Average and Actual Machine-Hours for Last