Tasman Products, Limited, of Australia has a Maintenance Department that services the equipment in the company's Forming

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Tasman Products Limited Of Australia Has A Maintenance Department That Services The Equipment In The Company S Forming 1 (299.79 KiB) Viewed 46 times

Tasman Products, Limited, of Australia has a Maintenance Department that services the equipment in the company's Forming Department and Assembly Department. The cost of this servicing is charged to the operating departments on the basis of machine- hours. Cost and other data relating to the Maintenance Department and to the other two departments for the most recent year are presented below. Data for the Maintenance Department follow: Variable costs for lubricants Fixed costs for salaries and other *Budgeted at $0.40 per machine-hour. Data for the Forming and Assembly Departments follow: Forming Department Assembly Department Total Budget $ 96,000* Percentage of Peak- Period Capacity Required 70% 30% 100% $ 150,000 Machine-Hours Budget 160,000 80,000 240,000 Actual $ 110,000 $ 153,000 Actual 190,000 70,000 260,000 The level of fixed costs in the Maintenance Department is determined by peak-period requirements. Required: Management would like data to assist in comparing actual performance to planned performance in the Maintenance Department and in the other departments. 1. How much Maintenance Department cost should be charged to the Forming Department and to the Assembly Department? 2. How much, if any, of the actual Maintenance Department costs for the year should be treated as a spending variance and not charged to the Forming and Assembly departments?