Variable service department costs should be charged to operating departments at
ID: 2451226 • Letter: V
Question
Variable service department costs should be charged to operating departments at the end of the period according to the formula: Budgeted rate x Budgeted activity. Budgeted rate x Actual activity. Actual rate x Actual activity. Budgeted total cost x percentage of peak-period capacity required. The long-run average or peak period needs of operating departments would be the most suitable base for allocating: the variable element of power costs. the fixed element of power costs. total power costs. any spending variance associated with power costs. Which of the following would be the least appropriate allocation base to allocate the cost of a human resources department to other departments? sales dollars labor turnover hours of training number of employees Your Company has a Maintenance Department that docs maintenance work on all equipment in operating departments A and B. The Maintenance Department budgeted variable maintenance costs of $0.20 per machine hour for June. Actual variable maintenance costs for the month totaled $15,000. Budgeted and actual machine hours in the operating departments for the month were: Budgeted machine hours Actual machine hours worked Dept. A 22.000 30.000 Dept. B 18.000 20.000 Total 40.000 50.000 How much variable maintenance cost for the month should be charged to Department A at the end of the month for performance evaluation purposes? $6,000 $15,000 $8,250 $9,000Explanation / Answer
Answer to the first queston:
9)
Option - B - Budgeted rate*Actual activity
Budgeted rate is set at the beginning of the period considering the estimated level of activity.
That is multiplied with the actual activity to charge the overhead to the operating department.
Any variance from the actual overhead figures are called under absorbed or over absobed overheads.
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