Question

Calculating and Using Dual Charging Rates The expected costs for the Maintenance Department of Stazler, Inc.,...

1. Calculating and Using Dual Charging Rates

The expected costs for the Maintenance Department of Stazler, Inc., for the coming year include:

 Fixed costs (salaries, tools): \$67,405 per year Variable costs (supplies): \$1.45 per maintenance hour

The Assembly and Packaging departments expect to use maintenance hours relatively evenly throughout the year. The Fabricating Department typically uses more maintenance hours in the month of November. Estimated usage in hours for the year and for the peak month is as follows:

 Yearly hours Monthly Peak Hours Assembly Department 4,900 250 Fabricating Department 6,300 1,500 Packaging Department 10,900 750 Total maintenance hours 22,100 2,500

Actual usage for the year by:

 Assembly Department 3,750 Fabricating Department 6,400 Packaging Department 10,100 Total maintenance hours 20,250

Required:

1. Calculate a variable rate for the Maintenance Department. Round your answer to the nearest cent.
\$ per maintenance hour

Calculate the allocated fixed cost for each using department based on its budgeted peak month usage in maintenance hours. Round your answers to the nearest dollar.

 Department Peak Number of Hours Allocated Fixed Cost Assembly \$ Fabricating Packaging Total \$

2. Use the two rates to assign the costs of the Maintenance Department to the user departments based on actual usage. Calculate the total amount charged for maintenance for the year. Round your answers to the nearest dollar.

 Assembly \$ Fabricating Packaging Total \$

3. What if the Assembly Department used 3,800 maintenance hours in the year? How much would have been charged out to the three departments? Round your answers to the nearest dollar.

 Assembly \$ Fabricating Packaging Total \$

Feedback

1. Variable rate is based on budgeted usage. See Cornerstone 7.2 for an example of how to calculate the allocated fixed cost for each department.

2. Fixed support department costs are allocated on the basis of original capacity. See Cornerstone 7.2.

3. Calculate as in Requirement 2 and change the Assembly Department's usage to 3,800.

Check My Work

 1) variable rate ( Given) = \$ 1.45 per maintenance hour
 DEPARTMENTS PEAKS NO. OF HOURS ALLOCATED FIXED COST Assembly 250 hours \$ 6,741 Fabricating 1500 hours \$40,443 Packaging 750 hours \$20,221 Total 2500 hours \$ 67,405

2)

 DEPARTMENTS Assembly \$ 12,179 Fabricating \$ 49,723 Packaging \$ 34,866 Total \$ 96,768

3)

 DEPARTMENTS Assembly \$ 12,251 Fabricating \$ 49,723 Packaging \$ 34,866 Total \$96,840

ALL EXPLANATION IS GIVEN BELOW :

 1) variable rate ( Given) = \$ 1.45 per maintenance hour calculate the allocated fixed cost for each department : DEPARTMENTS PEAKS NO. OF HOURS PERCENTAGE(%) BUDGETED FIXED COST ALLOCATED FIXED COST Assembly 250 hours 10% {250/2500} \$ 67,405 (given) \$ 6,741 {67405*10%} Fabricating 1500 hours 60% {1500/2500} \$ 67,405 (given) \$40,443   {67405*60%} Packaging 750 hours 30% {750/2500} \$ 67,405 (given) \$20,221 {67405*30%} Total 2500 hours 100% \$ 67,405 2) calculate the total amount charged for maintenance for the year:. DEPARTMENTS ACTUAL HOURS VARIABLE RATE VARIABLE AMOUNT FIXED AMOUNT TOTAL (both variable& fixed) Assembly 3750 hours \$ 1.45 \$ 5,437.5 {3750*\$1.45 } \$ 6,741 \$ 12,179 Fabricating 6400 hours \$ 1.45 \$9,280      {6400*\$1.45] \$ 40,443 \$ 49,723 Packaging 10,100 hours \$ 1.45 \$14,645    {10100*\$1.45} \$ 20,221 \$ 34,866 Total 20,250 hours \$ 29,363 \$67,405 \$ 96,768 3)calculate the amount charged to each departments if assembly department used 3,800 hours: DEPARTMENTS ACTUAL HOURS VARIABLE RATE VARIABLE AMOUNT FIXED AMOUNT TOTAL (both variable& fixed) Assembly 3800 hours \$ 1.45 \$ 5,510 {3800*\$1.45 } \$ 6,741 \$ 12,251 Fabricating 6400 hours \$ 1.45 \$9,280      {6400*\$1.45] \$ 40,443 \$ 49,723 Packaging 10,100 hours \$ 1.45 \$14,645    {10100*\$1.45} \$ 20,221 \$ 34,866 Total 20,250 hours \$ 29,435 \$67,405 \$96,840