Fox Company has the following data concerning the machine-hours in its operating departments:
Fixed costs of the maintenance department are budgeted at $30,000 per year.The fixed maintenance costs are incurred in order to service long-run average demand.The actual fixed maintenance cost was actually $32,000.How much fixed maintenance cost should be charged to Department B at the end of the year for performance evaluation purposes?
A) $12,000
B) $14,400
C) $15,000
D) $18,000

Question

Fox Company has the following data concerning the machine-hours in its operating departments:
 Fixed costs of the maintenance department are budgeted at $30,000 per year.The fixed maintenance costs are incurred in order to service long-run average demand.The actual fixed maintenance cost was actually $32,000.How much fixed maintenance cost should be charged to Department B at the end of the year for performance evaluation purposes?
A) $12,000 
B) $14,400 
C) $15,000 
D) $18,000

Quizplus · Accepted Answer

Percentage of long-run average machine-hours for operating Department B
= 30,000 MHs ÷ (10,000 MHs + 30,000 MHs + 20,000 MHs) = 50%
Fixed cost of maintenance department charged to operating Department B
= 50% × $30,000 = $15,000

Fox Company Has the Following Data Concerning the Machine-Hours in Its