ornerstone Exercise 7.1 (Algorithmic) Calculating and Using a Single Charging Ra
ID: 2510472 • Letter: O
Question
ornerstone Exercise 7.1 (Algorithmic)
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): $68,670 per year
Variable costs (supplies): $1.45 per maintenance hour
Estimated usage by:
Assembly Department 4,800
Fabricating Department 6,500
Packaging Department 10,500
Total maintenance hours 21,800
Actual usage by:
Assembly Department 3,500
Fabricating Department 6,600
Packaging Department 9,700
Total maintenance hours 19,800
Required:
1. Calculate a single charging rate for the Maintenance Department. Round your answer to the nearest cent.
$
per maintenance hour
2. Use this rate 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 3,550 maintenance hours in the year? How much would have been charged out to the three departments?
Assembly Department charge $
3,500
Fabricating Department charge
6,600
Packaging Department charge
Total amount charged $
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Explanation / Answer
1. Single charging rate for the maintenance departments:
Expected Fixed cost (salaries, tools) for the year = $68,670
Total estimated maintenance hours = 21,800 hours
Therefore, charging rate per hour = $68,670/21,800 hours = $3.15 per maintenance hour
2. Calculate the total amount charged for maintenance for the year:
Charged to Assembly department (3,500 hours * $3.15 per hour) = $11,025
Charged to Fabricating department (6,600 hours * $3.15 per hour) = $20,790
Charged to Packaging department (9,700 hours * $3.15 per hour) = $30,555
Total variable cost ($1.45 per hour * 19,800 hours) = $28,710
Therefore, total amount charged for the year = $91,080
3. if the Assembly Department used 3,550 maintenance hours in the year? How much would have been charged out to the three departments?
Charged to Assembly department (3,550 hours * $3.15 per hour) = $11,182.50
Charged to Fabricating department (6,600 hours * $3.15 per hour) = $20,790
Charged to Packaging department (9,700 hours * $3.15 per hour) = $30,555
Total variable cost ($1.45 per hour * 19,850 hours) = $28,782.50
Therefore, total amount charged for the year = $91,310
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