Henry Company has an Equipment Services department which 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 the most recent year follow:

The company budgeted its variable maintenance costs at $16,200 for the year. Actual variable maintenance costs totaled $22,800.

-For purposes of measuring performance, how much variable maintenance cost should be charged to the Assembly Department at the end of the year?

Question

Henry Company has an Equipment Services department which 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 the most recent year follow:

The company budgeted its variable maintenance costs at $16,200 for the year. Actual variable maintenance costs totaled $22,800.

-For purposes of measuring performance, how much variable maintenance cost should be charged to the Assembly Department at the end of the year?

Quizplus · Accepted Answer

Variable maintenance cost is applied to production based on machine-hours. The Assembly Department used 2,400 machine-hours during the year, and the variable maintenance cost rate is $5.25 per machine-hour. Therefore, the variable maintenance cost charged to the Assembly Department at the end of the year is 2,400 machine-hours * $5.25 per machine-hour = $12,600.

Henry Company Has an Equipment Services Department Which Performs All