Robert company has two productions department called assembly and Finishing. The

Question

Robert company has two productions department called assembly and Finishing. The maintenance department serves both production department. Maintenance cost are allocated based on labor hour. Budget fixed cost for the maintenance department are $ 30000. Bud get variable cost for the maintenance department are $ 5 per labor hour. Actual maintenance department cost are $ 36000 fixed and $ 100000 variable. Other relevant data follow.

                                                  Assembly                       Finishing

Capacity avalaible               20,000 labor hours    15000 la hours

Capacity Used                     15000 labor hours      9000 labor hours

The amount of variance maintenance department cost allocated to the assemble department should be

A) $ 75000

B) $ 100000

C) $ 48000

D0 62500          

Explanation / Answer

Ans: In the question there is a typo error of word Variance i.e. it should be Variable Material Department cost. Now, Budgeted variable cost is 5$ per hour hence budgeted variable cost allocated to Assemble depatment is 100000$ - Capacity available in assembly x 5$ per hour = 100000$. Now Actual overall variable cost of maintenance depatment is 100000$ which will be allocated to the maintenance depatment will be 100000$ x Capacity used for assembly / total capacity utilised for assembly & finishing = 62500$.

Hence the ans is option D) 62500$.

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