(Appendix 12B)Nathan Company has an Equipment Services Department that performs all needed maintenance work on the equipment in the company's Fabrication and Assembly Departments.Costs of the equipment Services Department are charged to the Fabrication and Assembly Departments on the basis of direct labor-hours.Data on direct labor-hours for last year follow: For the year just ended, the company budgeted its variable maintenance costs at $200, 000 for the year.Actual variable maintenance costs for the year totaled $275, 000. For performance evaluation purposes, how much of the $275, 000 of actual variable maintenance cost should be charged to the Assembly Department at the end of the year just ended?
A)$175, 000
B)$116, 900
C)$192, 500
D)$150, 000

Question

(Appendix 12B)Nathan Company has an Equipment Services Department that performs all needed maintenance work on the equipment in the company's Fabrication and Assembly Departments.Costs of the equipment Services Department are charged to the Fabrication and Assembly Departments on the basis of direct labor-hours.Data on direct labor-hours for last year follow:  For the year just ended, the company budgeted its variable maintenance costs at $200, 000 for the year.Actual variable maintenance costs for the year totaled $275, 000. For performance evaluation purposes, how much of the $275, 000 of actual variable maintenance cost should be charged to the Assembly Department at the end of the year just ended?
A)$175, 000 
B)$116, 900 
C)$192, 500 
D)$150, 000

Quizplus · Accepted Answer

Budgeted rate = Total budgeted cost ÷ Total budgeted activity
= $200, 000 ÷ 80, 000 direct labor-hours = $2.50 per direct labor-hour
Variable cost charges = Budgeted rate × Actual activity
= $2.50 per direct labor-hour × 70, 000 direct labor-hours = $175, 000

(Appendix 12B)Nathan Company Has an Equipment Services Department That Performs