Lakeside Nursing Home has two operating departments, Custodial Care and Rehabilitation. It also has a Housekeeping Department that serves the two operating departments. The costs of the Housekeeping Department are all variable and are charged to the operating departments on the basis of labor-hours. Data for September follow: The budgeted costs of the Housekeeping Department for September were $24,000 and the actual costs were $29,760.
How much Housekeeping Department cost should be charged to Rehabilitation at the end of September?

Question

Lakeside Nursing Home has two operating departments, Custodial Care and Rehabilitation. It also has a Housekeeping Department that serves the two operating departments. The costs of the Housekeeping Department are all variable and are charged to the operating departments on the basis of labor-hours. Data for September follow:  The budgeted costs of the Housekeeping Department for September were $24,000 and the actual costs were $29,760.
How much Housekeeping Department cost should be charged to Rehabilitation at the end of September?

Quizplus · Accepted Answer

Budgeted rate for variable cost = Total budgeted cost ÷ Total budgeted activity
= $24,000 ÷ (3,000 labor-hours + 1,000 labor-hours) = $6 per labor-hour
Variable charges = Budgeted rate for variable cost × Actual activity
= $6 per labor-hour × 1,600 labor-hours = $9,600

Lakeside Nursing Home Has Two Operating Departments, Custodial Care and Rehabilitation