Question

Calculating and Using a Single Charging Rate

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

Fixed costs (salaries, tools): $64,900 per year

Variable costs (supplies): $1.35 per maintenance hour

Estimated usage by:

Assembly Department	4,500
Fabricating Department	6,700
Packaging Department	10,800
Total maintenance hours	22,000

Actual usage by:

Assembly Department	3,960
Fabricating Department	6,800
Packaging Department	10,000
Total maintenance hours	20,760

Required:

1. Calculate a single charging rate for the Maintenance Department. Round your answer to the nearest cent.
$_______________________ per maintenance hour

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.
$____________

3. What if the Assembly Department used 4,000 maintenance hours in the year? How much would have been charged out to the three departments?

Assembly Department charge_$_____________
Fabricating Department charge$__________
Packaging Department charge$__________
Total amount charged$___________

Answer 1

SOLUTION

1. Single charging rate for the Maintenance Department

= Fixed charging rate + Variable charging rate

= ($64,900/22,000) + $1.35

= $2.95 + $1.35 = $4 per maintenance hour

2. Assembly Department = 3,960 * $4 = $15,840

Fabricating Department = 6,800* $4 = $27,200

Packaging Department = 10,000 * $4 = $40,000

Total amount charged = $15,840 + $27,200 + $40,000 = $83,040

2. Assembly Department = 4,000 * $4 = $16,000

Fabricating Department = 6,800* $4 = $27,200

Packaging Department = 10,000 * $4 = $40,000

Total amount charged = $16,000 + $27,200 + $40,000 = $83,200