(Appendix 12B)Delta Railroad has two operating divisions-Freight and Passenger.The Maintenance Department serves both divisions.Variable Maintenance Department costs are budgeted at $12 per thousand miles.The fixed Maintenance Department costs are budgeted at $800, 000 per year.The level of the fixed Maintenance Department costs are determined by the peak-period requirements.Data for last year follow: During last year, the Maintenance Department actually incurred $650, 000 in variable costs and $815, 000 in fixed costs. For performance evaluation purposes, how much of the Maintenance Department's actual fixed costs should be retained in that department as a spending variance?
A)$0
B)$15, 000
C)$12, 000
D)$18, 000

Question

(Appendix 12B)Delta Railroad has two operating divisions-Freight and Passenger.The Maintenance Department serves both divisions.Variable Maintenance Department costs are budgeted at $12 per thousand miles.The fixed Maintenance Department costs are budgeted at $800, 000 per year.The level of the fixed Maintenance Department costs are determined by the peak-period requirements.Data for last year follow:  During last year, the Maintenance Department actually incurred $650, 000 in variable costs and $815, 000 in fixed costs. For performance evaluation purposes, how much of the Maintenance Department's actual fixed costs should be retained in that department as a spending variance?
A)$0 
B)$15, 000 
C)$12, 000 
D)$18, 000

Quizplus · Accepted Answer

To calculate the spending variance, we need to compare the actual fixed costs with the budgeted fixed costs. 
Budgeted fixed costs = $800,000 
Actual fixed costs = $815,000 
Spending variance = actual fixed costs - budgeted fixed costs 
= $815,000 - $800,000 
= $15,000

Therefore, the answer is B, which is $15,000.

(Appendix 12B)Delta Railroad Has Two Operating Divisions-Freight and Passenger