Exam 8: Service Department Charges

Layton Company operates a free day-care center for the benefit of its employees. The company subsidizes the day-care center heavily and charges only a very nominal fee to employees using the center services. Budgeted and actual costs in the day-care center for the most recent year are as follows: The variable costs of the day-care center are charged to operating departments on the basis of employees in their departments. Data concerning these operating departments follow: The level of budgeted fixed costs in the day-care center is determined by the peak-period requirements. Required: a. Compute the dollar amount of the variable and fixed costs that should have been charged to each of the operating departments at the end of the year for purposes of evaluating performance. b. Identify the amount, if any, of actual costs that should not be charged to the operating departments for performance evaluation purposes.

Vosquez 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 budgeted based on the number of cases produced by the operating departments during the peak-period. Data appear below: For performance evaluation purposes, how much Maintenance Department cost should be charged to the Stains Division at the end of the year?

Delta Railroad has two operating divisions--Freight and Passenger. The Maintenance Department serves both divisions. Variable Maintenance Department costs are budgeted at $12 per thousand miles. The fixed Maintenance Department costs are budgeted at $800,000 per year. The level of the fixed Maintenance Department costs are determined by the peak-period requirements. Data for last year follow: During last year, the Maintenance Department actually incurred $650,000 in variable costs and $815,000 in fixed costs. -For performance evaluation purposes, how much of the Maintenance Department's actual variable costs should be retained in that department as a spending variance?

Vancuren Corporation has two operating divisions--an East Division and a West Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $31 per shipment. The Logistics Department's fixed costs are budgeted at $274,400 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year, actual Logistics Department variable costs totaled $215,820 and fixed costs totaled $294,690. The East Division had a total of 3,200 shipments and the West Division had a total of 3,400 shipments for the year. -How much actual Logistics Department cost should not be allocated to the operating divisions at the end of the year?

Wilson Company maintains a cafeteria for its employees. For June, variable food costs were budgeted at $18 per employee based on a budgeted level of 1,000 employees in other departments. During the month, an average of 950 employees worked in other departments and actual food costs totaled $16,150. How much food cost should be charged to other departments at the end of the month?

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 Maintenance Department cost should be allocated to the Stains Division at the end of the year?

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?

Delta Railroad has two operating divisions--Freight and Passenger. The Maintenance Department serves both divisions. Variable Maintenance Department costs are budgeted at $12 per thousand miles. The fixed Maintenance Department costs are budgeted at $800,000 per year. The level of the fixed Maintenance Department costs are determined by the peak-period requirements. Data for last year follow: During last year, the Maintenance Department actually incurred $650,000 in variable costs and $815,000 in fixed costs. -For performance evaluation purposes, how much of the Maintenance Department's actual fixed costs should be retained in that department as a spending variance?

Sweitzer 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 based on the number of cases produced by the operating departments during the peak-period. Data appear below: Required: a. Prepare a report showing how much of the Maintenance Department's costs should be charged to each of the operating divisions at the end of the year. b. How much of the actual Maintenance Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

Nathan Company has an Equipment Services Department that 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 last year follow: For the year just ended, the company budgeted its variable maintenance costs at $200,000 for the year. Actual variable maintenance costs for the year totaled $275,000. -For performance evaluation purposes, how much of the $275,000 of actual variable maintenance cost should be charged to the Assembly Department at the end of the year just ended?

The medical services department of Bantam Company budgeted $20 of variable medical expenses per employee for the year, based on 1,500 employees in the operating departments. During the year, an average of 1,200 employees were employed in operating departments. Actual variable medical expenses totaled $28,800 for the year. How much variable medical expenses should be charged to operating departments at year-end?

Plaut Corporation has two operating divisions--a Consumer Division and a Commercial Division. The company's Order Fulfillment Department provides services to both divisions. The variable costs of the Order Fulfillment Department are budgeted at $55 per order. The Order Fulfillment Department's fixed costs are budgeted at $403,200 for the year. The fixed costs of the Order Fulfillment Department are determined based on the peak-period orders. At the end of the year, actual Order Fulfillment Department variable costs totaled $409,528 and fixed costs totaled $422,330. The Consumer Division had a total of 1,730 orders and the Commercial Division had a total of 5,480 orders for the year. For purposes of evaluation performance, how much Order Fulfillment Department cost should be charged to the Commercial Division at the end of the year?

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?

Larubbio Corporation has two operating divisions--an Inland Division and a Coast Division. The company's Customer Service Department provides services to both divisions. The variable costs of the Customer Service Department are budgeted at $23 per order. The Customer Service Department's fixed costs are budgeted at $407,100 for the year. The fixed costs of the Customer Service Department are determined based on the peak-period orders. At the end of the year, actual Customer Service Department variable costs totaled $168,560 and fixed costs totaled $426,700. The Inland Division had a total of 2,110 orders and the Coast Division had a total of 4,770 orders for the year. Required: a. Prepare a report showing how much of the Customer Service Department's costs should be charged to each of the operating divisions at the end of the year. b. How much of the actual Customer Service Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

Bierly Corporation has two operating divisions--an Atlantic Division and a Pacific Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $34 per shipment. The Logistics Department's fixed costs are budgeted at $345,000 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year, actual Logistics Department variable costs totaled $343,680 and fixed costs totaled $356,530. The Atlantic Division had a total of 4,700 shipments and the Pacific Division had a total of 4,900 shipments for the year. How much Logistics Department cost should be charged to the Pacific Division at the end of the year?

Budgeted fixed costs in Swasey company's Maintenance Department were $180,000; actual fixed costs in the department for the year were $186,000. The level of budgeted fixed costs in the Maintenance Department depends on peak-period requirements. The Milling Department requires one-third of the peak-period capacity and the Assembly Department requires two-thirds of peak-period capacity. -How much fixed Maintenance Department cost should be charged to the Milling Department at year-end?

The Bolton Company operates a Health Care service department for its employees. The variable costs of this department are charged to the company's two operating departments, Assembly and Finishing, based on the number of employees in each department. The Health Care Department's total variable cost was budgeted at $55,000 for the past year; its actual total variable cost was $56,112. Additional data for the past year follow: -How much Health Care variable cost should be charged to Finishing at the end of the year?

Charges for service department costs to operating departments should be based on the actual variable costs and the budgeted fixed costs of the service department.

Lopez Company has a purchasing department that provides services to a factory located in Muncie and another in North Bend. Budgeted costs for the purchasing department consist of $72,000 per year of fixed costs and $5 per purchase order for variable costs. The level of budgeted fixed costs is determined by peak-period requirements. The Muncie factory requires 4/9 of the peak-period capacity and the North Bend factory requires 5/9. Variable costs are driven by the number of purchase orders processed. During the year, 3,500 purchase orders were processed for the Muncie factory and 4,500 purchase orders for the North Bend factory. Required: Compute the amount of purchasing department cost that should be charged to each factory for the year.

Brosnan Corporation has two operating divisions--a North Division and a South Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $39 per shipment. The Logistics Department's fixed costs are budgeted at $242,000 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year, actual Logistics Department variable costs totaled $245,830 and fixed costs totaled $247,360. The North Division had a total of 3,300 shipments and the South Division had a total of 2,800 shipments for the year. Required: a. Prepare a report showing how much of the Logistics Department's costs should be charged to each of the operating divisions at the end of the year. b. How much of the actual Logistics Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?