Question

Todd Company has two production departments called Assembly and Finishing. The maintenance department serves both production departments. Maintenance costs are allocated based on labor hours. Budgeted fixed costs for the maintenance department are $30,000. Budgeted variable costs for the maintenance department are $5.00 per labor hour. Other relevant data follow:

Assembly Finishing

Capacity available20,000 labor hours15,000 labor hours

Capacity used15,000 labor hours9,000 labor hours



Actual maintenance department costs:

Fixed$36,000

Variable$100,000



The amount of variable maintenance department costs allocated to the Finishing Department should be ________.

A) $37,500

B) $42,000

C) $45,000

D) $75,000

Answer 1

A) $37,500

Step-by-step explanation:

The computation of the variable maintenance department costs allocated to the Finishing Department is shown below:

= Variable actual maintenance department costs × labor hours ÷ total labor hours

= $100,000 × 9,000 labor hours ÷ 24,000 labor hours

= $37,500

The total labor hours is

= 15,000 labor hours + 9,000 labor hours

= 24,000 labor hours

We simply applied the above formula