The cost formula for the maintenance department of Rainbow LTD. Is $12600 per mo

Question

The cost formula for the maintenance department of Rainbow LTD. Is $12600 per month plus 4.50 per machine hour used by the production department? Calculate the maintenance cost that would be budgeted for a month in which 15200 machine hours are planned to be used: Maintenance Cost=__________ Prepare an appropriate performance report for the maintenance department assuming that 16120 machine hours were actually used in the month of June and that the total machine cost incurred was 83650. Original Budget (15200 MH) Flexed Budget (16120 MH) Actual Cost Variance

Explanation / Answer

Maintenance Cost = 12600+(15200*4.50) i.e 81000

Budgeted cost for 16120 machine hours = 12600+(16120*4.50) ie. 85140

Variance = 85140-83650 i.e 1490 Favourable

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