Ghia Manufacturing Corporation charges its Maintenance Department's service costs to two operating departments, Fabrication and Assembly. Charges are made on the basis of machine-hours. Information pertaining to machine-hours for the year follows: The following costs pertain to the Maintenance Department:
For performance evaluation purposes, how much of the Maintenance Department's fixed cost should be charged to the Assembly Department at year-end?

Question

Ghia Manufacturing Corporation charges its Maintenance Department's service costs to two operating departments, Fabrication and Assembly. Charges are made on the basis of machine-hours. Information pertaining to machine-hours for the year follows:  The following costs pertain to the Maintenance Department:
 For performance evaluation purposes, how much of the Maintenance Department's fixed cost should be charged to the Assembly Department at year-end?

Quizplus · Accepted Answer

Fixed charges = Percentage of peak--period capacity required × Budgeted fixed cost
= 76.8% × $500,000 = $384,000

Ghia Manufacturing Corporation Charges Its Maintenance Department's Service Costs to Two