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12-121
134.
The Barton Creek Company has three client-contact departments: Market Research,
Branding, and Promotion. Each department requires the services of the Legal Department
for the contracts that each undertakes. The size of the Legal Department was based on
long-run estimates of contracts. Information on the Legal Department's budgeted and
actual costs is as follows:
The budget for the Legal Department is $200,000 + $7.50/contract. The budgeted volume
of contracts is as follows:
Market Research
300
Branding
500
Promotion
700
12-123
135.
The Barton Creek Company has three client-contact departments: Market Research,
Branding, and Promotion. Each department requires the services of the Legal Department
for the contracts that each undertakes. The size of the Legal Department was based on
long-run estimates of contracts. Information on the Legal Department's budgeted and
actual costs is as follows:
The budget for the Legal Department is $400,000 + $15/contract. The budgeted volume
of contracts is as follows:
Market Research
200
Branding
500
Promotion
800
12-125
136.
Seattle Corporation has two operating divisions - Inland Division and Coast Division. The
company's Customer Service Department provides services to both divisions. The variable
costs of the Customer Service Department are budgeted at $29 per order. The Customer
Service Department's fixed costs are budgeted at $381,600 for the year. The fixed costs of
the Customer Service Department are determined based on the peak period orders.
Percentage of Peak
Period Capacity
Required
Budgeted
Orders
Inland
Division
25%
1,500
Coast
Division
75%
5,700
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137.
Warehouse Services is a service department in the Vancouver Company, providing storage
service to three operating departments. The company charges the costs of this
department to operating departments on the basis of cubic feet occupied.
Last year, Warehouse Services budgeted variable storage cost of $0.15 per cubic foot
occupied. The budgeted total fixed cost was $120,000, and was determined by the long-
term storage needs of the operating departments. Actual storage space occupied during
the year, along with long-term storage needs of operating departments, is given below:
Operating Department
X
Y
Z
Long-term storage
needs in cubic feet
200,000
600,000
800,000
Actual storage space
used
160,000
590,000
750,000
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138.
Terrain, Inc. has a maintenance department that provides services to the company's two
operating departments. The variable costs of the maintenance department are charged on
the basis of the number of maintenance hours logged in each department. Last year,
budgeted variable maintenance costs were $8.60 per maintenance hour and actual
variable maintenance costs were $8.75 per maintenance hour.
The budgeted and actual maintenance hours for each operating department for last year
appear below:
Operating
Departments
A
B
Budgeted maintenance
hours
1,000
2,000
Actual maintenance
hours
1,100
1,700
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139.
Layton Company operates a cafeteria for the benefit of its employees. The company
subsidizes the cafeteria heavily by allowing employees to purchase meals at greatly
reduced prices. Budgeted and actual costs in the cafeteria for the year just ended are as
follows:
Budgeted
Actual
Variable costs
$500,000
$436,000
Fixed costs
$340,000
$352,000
Costs of the cafeteria are charged to producing departments on the basis of the number
of employees in these departments. Fixed costs are charged on the basis of the peak-
period number of employees. Data on employees in the company's producing departments
follows:
Machining
Assembly
Total
Budgeted number
of employees
300
500
800
Actual number of
employees
200
400
600
Peak-period
number of
employees
400
600
1,000
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140.
The Sunset Corporation operates one central plant that has two divisions, the Flashlight
Division and the Night Light Division. The following data apply to the coming budget year.
Budgeted costs of operating the plant for
2,000 to 3,000 hours:
Fixed operating costs
$900,000
12-132
per year
Variable operating
costs
$1,200
per
hour
Budgeted long-run
usage per year:
Flashlight Division
2,000
hours
Night Light Division
500
hours
Practical capacity
3,000
hours
141.
Smash Burgers is a fast-food restaurant that sells vegetarian burgers and hot dogs in a
1950s environment. The fixed operating costs of the company are $5,000 per month. The
controlling shareholder, interested in product profitability and pricing, wants all costs
allocated to either the burgers or the hot dogs. The following information is provided for
12-133
the operations of the company:
Burgers
Hot Dogs
Sales for January
4,000
2,400
Sales for February
6,400
2,400
142.
Cost allocation bases are factors that cost management analysts use to assign indirect
12-134
12-136
143.
Affordable Credit Checks produces two styles of credit reports: personal and corporate.
The difference between the two is the amount of background information and data
collection required. The corporate report uses more skilled personnel because additional
checking and data are required. The relevant figures for the year just completed follow:
Total support service costs to be allocated are $3,200,000.
Allocation base
Individual
Corporate
Data purchased
$40,000
$80,000
Research hours
24,000
30,000
Interview hours
1,000
10,000
Number of reports
16,000
3,000
12-138
144.
Rainier Company has a purchasing department that provides services to two factories
located in Carbondale and the other in Peoria. Budgeted costs for the purchasing
department consist of $55,000 per year of fixed costs and $8 per purchase order for
variable costs. The level of budgeted fixed costs is determined by the peak-period
requirements. The Carbondale factory requires 40% of the peak-period capacity and the
Peoria factory requires 60%.
During the coming year, 1,800 purchase orders were processed for the Carbondale factory
and 2,700 purchase orders for the Peoria factory.
Required:
Compute the amount of purchasing department cost that should be charged to each
factory for the year.
145.
Koski Corporation's Maintenance Department provides services to the company's two
operating divisions - the Paints Division and the Stains Division. The variable costs of the
Maintenance Department are budgeted based on the number of cases produced by the
operating departments. The fixed costs of the Maintenance Department are determined
based on the number of cases produced by the operating departments during the peak
12-139
period. Data appear below:
Maintenance Department:
Budgeted variable cost
$4 per
case
Budgeted total fixed cost
$870,000
Actual total variable cost
$382,756
Actual total fixed cost
$871,590
Paints Division:
Percentage of peak period capacity
required
40%
Budgeted cases
26,000
Actual cases
26,010
Stains Division:
Percentage of peak period capacity
required
60%
Budgeted cases
61,000
Actual cases
60,980
