Exam 8: Service Department Charges

Sheinberg 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 $73 per order. The Order Fulfillment Department's fixed costs are budgeted at $425,000 for the year. The fixed costs of the Order Fulfillment Department are budgeted based on the peak-period orders. At the end of the year, actual Order Fulfillment Department variable costs totaled $635,485 and fixed costs totaled $443,380. The Consumer Division had a total of 2,340 orders and the Commercial Division had a total of 6,190 orders for the year. -How much Order Fulfillment Department cost should be allocated to the Commercial Division at the end of the year?

Sheinberg 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 $73 per order. The Order Fulfillment Department's fixed costs are budgeted at $425,000 for the year. The fixed costs of the Order Fulfillment Department are budgeted based on the peak-period orders. At the end of the year, actual Order Fulfillment Department variable costs totaled $635,485 and fixed costs totaled $443,380. The Consumer Division had a total of 2,340 orders and the Commercial Division had a total of 6,190 orders for the year. -How much actual Order Fulfillment Department cost should not be allocated to the operating divisions at the end of the year?

Charlie Company has provided the following data concerning power consumption in the company's two operating departments: The company has a Power Services department which provides electrical power for the operating departments. Fixed costs in Power Services are budgeted at $300,000 for the year and are incurred in order to support peak-period power requirements. How much of this cost should be charged to Department 1?

Ideally, the base selected for charging a service department's costs to operating departments should be whatever drives those costs.

The Hudson Block Company has a trucking department that delivers crushed stone from the company's quarry to its two cement block production facilities--the West Plant and the East Plant. Budgeted costs for the trucking department are $340,000 per year in fixed costs and $0.30 per ton variable cost. Last year, 70,000 tons of crushed stone were budgeted to be delivered to the West Plant and 100,000 tons of crushed stone to the East Plant. During the year, the trucking department actually delivered 75,000 tons of crushed stone to the West Plant and 90,000 tons to the East Plant. Its actual costs for the year were $65,000 variable and $350,000 fixed. The level of budgeted fixed costs is determined by peak-period requirements. The West Plant requires 40% of the peak-period capacity and the East Plant requires 60%. The company allocates fixed and variable costs separately. -For performance evaluation purposes, how much variable trucking department cost should be charged to the West Plant at the end of the year?

The Hudson Block Company has a trucking department that delivers crushed stone from the company's quarry to its two cement block production facilities--the West Plant and the East Plant. Budgeted costs for the trucking department are $340,000 per year in fixed costs and $0.30 per ton variable cost. Last year, 70,000 tons of crushed stone were budgeted to be delivered to the West Plant and 100,000 tons of crushed stone to the East Plant. During the year, the trucking department actually delivered 75,000 tons of crushed stone to the West Plant and 90,000 tons to the East Plant. Its actual costs for the year were $65,000 variable and $350,000 fixed. The level of budgeted fixed costs is determined by peak-period requirements. The West Plant requires 40% of the peak-period capacity and the East Plant requires 60%. The company allocates fixed and variable costs separately. -For performance evaluation purposes, how much of the actual trucking department cost should not be charged to the plants at the end of the year?

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 Assembly for performance evaluation purposes at the end of the year?

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: -For performance evaluation purposes, how much of the actual Health Care variable cost should not be charged to the operating departments at the end of the year?

The Hudson Block Company has a trucking department that delivers crushed stone from the company's quarry to its two cement block production facilities--the West Plant and the East Plant. Budgeted costs for the trucking department are $340,000 per year in fixed costs and $0.30 per ton variable cost. Last year, 70,000 tons of crushed stone were budgeted to be delivered to the West Plant and 100,000 tons of crushed stone to the East Plant. During the year, the trucking department actually delivered 75,000 tons of crushed stone to the West Plant and 90,000 tons to the East Plant. Its actual costs for the year were $65,000 variable and $350,000 fixed. The level of budgeted fixed costs is determined by peak-period requirements. The West Plant requires 40% of the peak-period capacity and the East Plant requires 60%. The company allocates fixed and variable costs separately. -For performance evaluation purposes, how much fixed trucking department cost should be charged to the West Plant at the end of the year?

For performance evaluation purposes, any variance over budgeted fixed costs in a service department should be charged to the departments that use the service.

Hosang 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 $32 per shipment. The Logistics Department's fixed costs are budgeted at $243,000 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand. How much Logistics Department cost should be charged to the Atlantic Division at the end of the year?