Bobby Company has two production departments, Mixing and Finishing, served by one maintenance department.Budgeted fixed costs for the maintenance department were $40,000, and the variable cost per labor hour was $4.00.Other relevant data are as follows: $$\begin{array} { l r r }
& \text { Mixing } & \text { Finishing } \
\text { Long-run capacity available* } & 18,000 & 12,000 \
\text { Budgeted* } & 12,000 & 10,500 \
\text { Actual* } & 15,000 & 9,000
\end{array}$$ *in labor hours
Actual maintenance department costs were $36,000 fixed and $100,000 variable.The amount of fixed maintenance costs allocated to the Finishing Department should be _____.
A)$18,000
B)$16,000
C)$14,000
D)$11,250

Question

Bobby Company has two production departments, Mixing and Finishing, served by one maintenance department.Budgeted fixed costs for the maintenance department were $40,000, and the variable cost per labor hour was $4.00.Other relevant data are as follows: $$\begin{array} { l r r } 
& \text { Mixing } & \text { Finishing } \
\text { Long-run capacity available* } & 18,000 & 12,000 \
\text { Budgeted* } & 12,000 & 10,500 \
\text { Actual* } & 15,000 & 9,000
\end{array}$$ *in labor hours
Actual maintenance department costs were $36,000 fixed and $100,000 variable.The amount of fixed maintenance costs allocated to the Finishing Department should be _____.
A)$18,000
B)$16,000
C)$14,000
D)$11,250

Quizplus · Accepted Answer

The fixed maintenance costs should be allocated based on the budgeted labor hours because these costs are not influenced by the actual usage of the services. The total budgeted labor hours are 12,000 (Mixing) + 10,500 (Finishing) = 22,500 hours. The Finishing Department's share of the total budgeted hours is 10,500 / 22,500 = 46.67%. Therefore, the Finishing Department should be allocated 46.67% of the $40,000 budgeted fixed maintenance costs, which equals $18,667. However, the actual fixed costs were $36,000, not $40,000. Applying the same percentage (46.67%) to the actual fixed costs of $36,000 results in $16,800. The closest option to this calculation is $16,000, indicating a possible mistake in the calculation or the options provided. Given the options, $16,000 is the closest correct choice, assuming the intent was to allocate based on the actual fixed costs incurred.

Bobby Company Has Two Production Departments, Mixing and Finishing, Served