The cost formula for the maintenance department of Rainbow, Ltd., is $19,200 per

Question

The cost formula for the maintenance department of Rainbow, Ltd., is $19,200 per month plus $7.70 per machine hour used by the production department Required a. Calculate the maintenance cost that would be budgeted for a month in which 6,800 machine hours are planned to be used aintenance cost b. Prepare an appropriate performance report for the maintenance department assuming that 7,100 machine hours were actually used in the month of May and that the total maintenance cost incurred was $68,900. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) d Budget (7,100 MH) l Bu Actual Cost Variance (6,800 MH) Total maintenance cost

Explanation / Answer

Answer:-a)- Maintenance cost =$19200+ (6800 machine hours*$7.70 per machine hour)

=$19200+$52360

=$71560

b)-

Particulars Original budget (6800 MH) Flexed budget (7100 MH) Actual cost Variance $ $ $ $ Total maintenance cost 71560 $19200+(7100 MHs*$7.70 per machine hour)=73870 68900 73870-68900 =4970 Favourable

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