Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel mills-the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $309,500 per year, consisting of $0.23 per ton variable cost and $259,500 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 67% of the Transport Services Department's capacity and the Southern Plant requires 33%. During the year, the Transport Services Department actually hauled 120,000 tons of ore to the Northern Plant and 68,400 tons to the Southern Plant. The Transport Services Department incurred $368,000 in cost during the year, of which $53,800 was variable cost and $314,200 was fixed cost. Required: 1. How much of the Transport Services Department's variable costs should be charged to each plant? 2. How much of the $314,200 in fixed cost should be charged to each plant? 3. Should any of the Transport Services Department's actual total cost of $368,000 be treated as a spending variance and not charged to the plants?

Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel mills-the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $309,500 per year, consisting of $0.23 per ton variable cost and $259,500 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 67% of the Transport Services Department's capacity and the Southern Plant requires 33%. During the year, the Transport Services Department actually hauled 120,000 tons of ore to the Northern Plant and 68,400 tons to the Southern Plant. The Transport Services Department incurred $368,000 in cost during the year, of which $53,800 was variable cost and $314,200 was fixed cost. Required: 1. How much of the Transport Services Department's variable costs should be charged to each plant? 2. How much of the $314,200 in fixed cost should be charged to each plant? 3. Should any of the Transport Services Department's actual total cost of $368,000 be treated as a spending variance and not charged to the plants?

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter19: Support Department And Joint Cost Allocation

Section: Chapter Questions

Problem 2CMA: Adam Corporation manufactures computer tables and has the following budgeted indirect manufacturing...

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Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 51,000 machine hours per year, which represents 25,500 units of output. Annual budgeted fixed factory overhead costs are $255,000 and the budgeted variable factory overhead cost rate is $2.30 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 18,800 units, which took 40,000 machine hours. Actual fixed factory overhead costs for the year amounted to $249,400 while the actual variable overhead cost per unit was $2.20. Based on the information provided above, prepare the appropriate journal entries to record: (a) actual factory overhead costs for the year, (b) the applied factory overhead costs for the year (both variable and fixed), and (c) the total flexible-budget variance and the production volume variance for the period. Assume that the…
Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 51,600 machine hours per year, which represents 25,800 units of output. Annual budgeted fixed factory overhead costs are $258,000 and the budgeted variable factory overhead cost rate is $2.50 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 19,500 units, which took 40,600 machine hours. Actual fixed factory overhead costs for the year amounted to $251,600 while the actual variable overhead cost per unit was $2.40. Assume that at the end of the year, management of Patel and Sons decides that the overhead cost variances should be allocated to WIP Inventory, Finished Goods Inventory, and Cost of Goods Sold (CGS) using the following percentages: 10%, 20%, and 70%, respectively. Provide the proper journal entry to close out the…
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