Chapter 11B - Solution Manual

# Chapter 11B - Solution Manual - Chapter 11B Service...

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Chapter 11B Service Department Charges Appendix 11B Service Department Charges Exercise 11B-1  (20 minutes) 1. Long-Run Average  Number of  Employees Percentage Cutting Department. ...... 600 30% Milling Department. ........ 400 20% Assembly Department. .. 1,000   50     % Total. .............................. 2,000 100 % Cutting Milling Assembl y Variable cost charges: \$60 per employee × 500 employees \$ 30,000 \$60 per employee × 400 employees \$ 24,000 \$60 per employee × 800 employees \$ 48,000 Fixed cost charges: 30% × \$600,000. .............................. 180,000 20% × \$600,000. .............................. 120,000 50% × \$600,000. ..............................                                                   300,000     Total charges. ...................................... \$210,000 \$144,000 \$348,000 2. Part of the total actual cost is not charged to the operating departments  as shown below: Variable  Cost Fixed  Cost Total Total actual costs incurred. ............... \$105,400 \$605,000 \$710,400 Total charges. ...................................   102,000       600,000       702,000     Spending variance. .......................... \$       3,400     \$      5,000     \$      8,400     11B-1

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Chapter 11B Service Department Charges The overall spending variance of \$8,400 represents costs incurred in  excess of the budgeted variable cost of \$60 per employee and the  budgeted fixed cost of \$600,000. This \$8,400 in uncharged costs is the  responsibility of the Medical Services Department. 11B-2
Chapter 11B Service Department Charges Exercise 11B-2  (20 minutes) 1. Men’s Women’s Shoes House- wares Total Percentage of 2010 sales. ............................ 8% 40% 28% 24% 100% Allocation of 2010 fixed administrative  expenses (based on the above  percentages). ............................................ \$ 72,000 \$360,000 \$252,000 \$216,000 \$900,000 2. 2010 allocation (above). ............................... \$ 72,000 \$360,000 \$252,000 \$216,000 \$900,000 2009 allocation. ............................................     90,000       225,000       315,000         270,000       900,000     Increase (decrease) in allocation. ................ \$(18,000 ) \$135,000 \$      (63,000     ) \$      (54,000     ) \$                      0

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Chapter 11B - Solution Manual - Chapter 11B Service...

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