Chapter 11 Appendix B Service Department Charges
Gunnison Foods has two operating departments, Processing and Packaging. It also has a
Housekeeping Department that serves the two operating departments. The costs of the
Housekeeping Department are all variable and are allocated to the operating departments on
the basis of the number of employees. Data for last year follow:
The budgeted costs of the Housekeeping Department were $40,800 and the actual costs were
$44,980.
28. How much Housekeeping Department cost should have been charged to Packaging at the
end of last year for performance evaluation purposes?
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29. How much of the actual Housekeeping Department costs should not have been charged to
the operating departments for performance evaluation purposes?
Boudrie 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 by the
number of cases produced by the operating departments during the peak period. Data appear
below:
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30. How much Maintenance Department cost should be allocated to the Stains Division at the
end of the year?
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31. How much actual Maintenance Department cost should not be allocated to the operating
divisions at the end of the year?
Fixed costs budgeted for Caldwell Company’s Maintenance Department for the year totaled
$480,000; actual fixed costs for the year totaled $510,000. The level of budgeted fixed costs is
determined by peak-period requirements. The Milling Department requires 1/3 of the peak-
period capacity and the Assembly Department requires 2/3.
Chapter 11 Appendix B Service Department Charges
32. How much fixed maintenance cost should be charged to the Assembly Department at the
end of the year for purposes of measuring performance?
33. How much of the actual fixed maintenance cost for the year should be kept in the
Maintenance Department and not allocated to the other departments for performance
evaluation purposes?
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Higuera Corporation has two operating divisions-a Consumer Division and a Commercial
Division. The company’s Order Fulfillment Department provides services to both divisions.
The variable costs of the Order Fulfillment Department are budgeted at $28 per order. The
Order Fulfillment Department’s fixed costs are budgeted at $280,800 for the year. The fixed
costs of the Order Fulfillment Department are budgeted based on the peak period orders.
At the end of the year, actual Order Fulfillment Department variable costs totaled $152,810
and fixed costs totaled $286,580. The Consumer Division had a total of 1,720 orders and the
Commercial Division had a total of 3,460 orders for the year.
34. How much Order Fulfillment Department cost should be allocated to the Commercial
Division at the end of the year?
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35. How much actual Order Fulfillment Department cost should not be allocated to the
operating divisions at the end of the year?
Essay Questions
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36. Scuderi Corporation has two operating divisions-an Inland Division and a 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.
At the end of the year, actual Customer Service Department variable costs totaled $219,905
and fixed costs totaled $383,860. The Inland Division had a total of 1,520 orders and the
Coast Division had a total of 5,690 orders for the year.
Required:
a. Prepare a report showing how much of the Customer Service Department’s costs should be
charged to each of the operating divisions at the end of the year.
b. How much of the actual Customer Service Department costs should not be charged to the
operating divisions at the end of the year? Who should be held responsible for these
uncharged costs?
Chapter 11 Appendix B Service Department Charges
Chapter 11 Appendix B Service Department Charges
37. Warehouse Services is a service department in the Werner 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:
Actual variable storage costs amounted to $0.16 per cubic foot occupied. Actual fixed storage
costs were $123,000.
Required:
a. Compute the amount of variable storage cost that should be charged to each operating
department at the end of the year for performance evaluation purposes.
b. Compute the amount of fixed storage cost that should be charged to each operating
department at the end of the year for performance evaluation purposes.
Chapter 11 Appendix B Service Department Charges
38. Trenron, 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:
Required:
a. Compute the amount of variable maintenance department cost that should have been
charged to each operating department at the end of the year for performance evaluation
purposes.
b. Compute the amount of actual variable maintenance department cost that should not have
been charged to the operating departments at the end of the year for performance evaluation
purposes.
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39. Kosek 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 period. Data
appear below:
Required:
a. Prepare a report showing how much of the Maintenance Department’s costs should be
charged to each of the operating divisions at the end of the year.
b. How much of the actual Maintenance Department costs should not be charged to the
operating divisions at the end of the year? Who should be held responsible for these
uncharged costs?
Chapter 11 Appendix B Service Department Charges
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40. Leslie 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:
*Unrecovered cost after deducting amounts received from employees.
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:
Required:
a. Compute the dollar amount of variable and fixed costs that should be charged to each of the
producing departments at the end of the year for purposes of evaluating performance.
b. Identify the amount, if any, of actual costs that should not be charged to the operating
departments.
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Chapter 11 Appendix B Service Department Charges
41. Redder Company has a purchasing department that provides services to two factories
located in Fargo and the other in Custer. 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 Fargo factory
requires 40% of the peak-period capacity and the Custer factory requires 60%.
During the coming year, 1,800 purchase orders were processed for the Fargo factory and
2,700 purchase orders for the Custer factory.
Required:
Compute the amount of purchasing department cost that should be charged to each factory for
the year.
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42. Zindell Corporation has two operating divisions-a North Division and a South Division.
The company’s Logistics Department services both divisions. The variable costs of the
Logistics Department are budgeted at $33 per shipment. The Logistics Department’s fixed
costs are budgeted at $369,200 for the year. The fixed costs of the Logistics Department are
determined based on peak-period demand.
At the end of the year, actual Logistics Department variable costs totaled $307,050 and fixed
costs totaled $374,720. The North Division had a total of 3,900 shipments and the South
Division had a total of 5,000 shipments for the year.
Required:
a. Prepare a report showing how much of the Logistics Department’s costs should be charged
to each of the operating divisions at the end of the year.
b. How much of the actual Logistics Department costs should not be charged to the operating
divisions at the end of the year? Who should be held responsible for these uncharged costs?
Chapter 11 Appendix B Service Department Charges