Grimwood Corporation's Maintenance Department provides services to the company's two operating divisions--the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The fixed costs of the Maintenance Department are determined by the number of cases produced by the operating departments during the peak-period. Data appear below:

-How much actual Maintenance Department cost should not be allocated to the operating divisions at the end of the year?

Question

Grimwood Corporation's Maintenance Department provides services to the company's two operating divisions--the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The fixed costs of the Maintenance Department are determined by the number of cases produced by the operating departments during the peak-period. Data appear below:

-How much actual Maintenance Department cost should not be allocated to the operating divisions at the end of the year?

Quizplus · Accepted Answer

The actual Maintenance Department cost of $34,628 should not be allocated to the operating divisions at the end of the year because it is an indirect cost that is not directly related to the production of goods or services.

Grimwood Corporation's Maintenance Department Provides Services to the Company's Two