(Appendix 12B)Delta Railroad has two operating divisions-Freight and Passenger.The Maintenance Department serves both divisions.Variable Maintenance Department costs are budgeted at $12 per thousand miles.The fixed Maintenance Department costs are budgeted at $800, 000 per year.The level of the fixed Maintenance Department costs are determined by the peak-period requirements.Data for last year follow: During last year, the Maintenance Department actually incurred $650, 000 in variable costs and $815, 000 in fixed costs. For performance evaluation purposes, how much of the fixed Maintenance Department cost should be charged to the Freight Division at the end of the year?
A)$480, 000
B)$440, 000
C)$472, 000
D)$50, 000

Question

(Appendix 12B)Delta Railroad has two operating divisions-Freight and Passenger.The Maintenance Department serves both divisions.Variable Maintenance Department costs are budgeted at $12 per thousand miles.The fixed Maintenance Department costs are budgeted at $800, 000 per year.The level of the fixed Maintenance Department costs are determined by the peak-period requirements.Data for last year follow:  During last year, the Maintenance Department actually incurred $650, 000 in variable costs and $815, 000 in fixed costs. For performance evaluation purposes, how much of the fixed Maintenance Department cost should be charged to the Freight Division at the end of the year?
A)$480, 000 
B)$440, 000 
C)$472, 000 
D)$50, 000

Quizplus · Accepted Answer

Fixed charges = Percentage of peak-period capacity required × Budgeted fixed cost
= 55% × $800, 000 = $440, 000

(Appendix 12B)Delta Railroad Has Two Operating Divisions-Freight and Passenger