Hannibal Steel Company has a Transport Services Department that provides trucks
ID: 2454052 • Letter: H
Question
Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company’s mine to its two steel mills—the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $153,500 per year, consisting of $0.19 per ton variable cost and $103,500 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 56% of the Transport Services Department’s capacity and the Southern Plant requires 44%. During the year, the Transport Services Department actually hauled the following amounts of ore for the two plants: Northern Plant, 127,000 tons; Southern Plant, 59,700 tons. The Transport Services Department incurred $362,000 in cost during the year, of which $53,200 was variable cost and $308,800 was fixed cost.
1. Determine how much of the $53,200 in variable cost should be charged to each plant
Determine how much of the $308,800 in fixed cost should be charged to each plant.
How much amount out of $362,000 in the Transport Services Department cost should not be charged to the plants?
Explanation / Answer
Hannibal Steel Company
(Amount is $)
Budgeted Transport cost
1,53,500.00
Variable Cost per ton
0.19
Fixed Cost
1,03,500.00
Budgetes Production/ Capacity of transport service department
2,63,158
(Budgeted Transport Cost-Fixed Cost)/Variable cost per ton
Budgeted Fixed Cost per Tons
0.39
Requirement of Northern Plant
56%
Requirement of Southern Plant
44%
Fixed Cost Requiremenr of Each Plant
Northern Plant
57960
Southern Plant
45540
Actual quantity of ore hauled:
Northern Plant
1,27,000.00
Southern Plant
59,700.00
Total
1,86,700.00
Total Cost of Transport Department during the year
3,62,000.00
Variable Cost
53,200.00
Fixed Cost
3,08,800.00
Variable cost to be charged to:
Northern Plant
36,188.54
Southern Plant
17,011.46
Total Variable Cost
53,200.00
Fixed Cost to be Charged to:
Northern Plant
57,960.00
Southern Plant
45,540.00
Total Fixed Cost
1,03,500.00
Cost that should not be charges to plants
2,05,300.00
Hannibal Steel Company
(Amount is $)
Budgeted Transport cost
1,53,500.00
Variable Cost per ton
0.19
Fixed Cost
1,03,500.00
Budgetes Production/ Capacity of transport service department
2,63,158
(Budgeted Transport Cost-Fixed Cost)/Variable cost per ton
Budgeted Fixed Cost per Tons
0.39
Requirement of Northern Plant
56%
Requirement of Southern Plant
44%
Fixed Cost Requiremenr of Each Plant
Northern Plant
57960
Southern Plant
45540
Actual quantity of ore hauled:
Northern Plant
1,27,000.00
Southern Plant
59,700.00
Total
1,86,700.00
Total Cost of Transport Department during the year
3,62,000.00
Variable Cost
53,200.00
Fixed Cost
3,08,800.00
Variable cost to be charged to:
Northern Plant
36,188.54
Southern Plant
17,011.46
Total Variable Cost
53,200.00
Fixed Cost to be Charged to:
Northern Plant
57,960.00
Southern Plant
45,540.00
Total Fixed Cost
1,03,500.00
Cost that should not be charges to plants
2,05,300.00
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