1.
Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.
Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and
:
The Medical Services Department charges the Cutting Department, Milling Department, and Assembly Department.
2.
Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.
:
The costs that should be treated as a spending variance and not charged to the operating departments.
Want to see the full answer?
Check out a sample textbook solutionChapter 11 Solutions
MANAGERIAL ACCOUNTING (LOOSE) W/CONNECT
- Problem 11-66 (Algo) Reciprocal Cost Allocation-Outsourcing a Service Department (LO 11-4, 5) Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded. Using Department Supplying Department Processing Administration Maintenance Direct cost Processing Administration 0 0 10% $86,000 Variable costs Fixed costs Total costs Avoidable fixed costs C. 50% 0 20% a. Processing Department b. Administration Department Maintenance Department $590,000 Maintenance 0 0 0 $256,000 Maximum Amount Branches 10% 60% 20% $4,400,000 The cost accountant at Great Eastern Credit Union estimates that the cost structures in its departments are as follows. Processing Administration Maintenance Branches $133,000 $1,800,000 $60,000 26,000 $153,000 437,000 123,000 2,600,000 $86,000 $256,000 $4,400,000 $590,000 $276,000 $ 8,000…arrow_forwardQuestion 7 Howard Bannister Company budgets the following per-unit costs for the upcoming year: Direct Material Direct Labor Variable Selling Expenses Sales commission $32.54 $21.24 $15.70 $20.10 Howard budgets producing 1,017 units and having 27,370 of total variable overhead, 49,540 of total fixed overhead, and 30,387 of total fixed S&A costs for the year. Howard allocates overhead based on units produced. What is the per-unit cost of inventory under variable costing (i.e., assuming budgets are correct, how much will be the total amount debited to WIP if Howard produces one additional unit)? Round your answer to two decimal places (e.g., 192.37).arrow_forwardQUESTION 5 The following budgeted profit statement has been prepared using absorption costing principles.A company manufactures and sells a single product which has the following cost and sellingprice structure: P/unit P/unit Selling price P120 Direct material 22 Direct labour 36 Variable overhead 14 Fixed overhead 12 P84 Profit per unit P36 The fixed overhead absorption rate is based on the normal capacity of 2,000 units per month.Assume that the same amount is spent each month on fixed overheads.Budgeted sales for next month are 2,200 units.You are required to calculate:a. The breakeven point, in sales units per month. b. The margin of safety for the next month. c. The budgeted profit for the next month. d. The sales required to achieve a profit of P96,000.arrow_forward
- Assume that a company provided the following cost formulas for three of its expenses (where q refers to the number of hours worked): Rent (fixed) Supplies (variable) Utilities (mixed) Multiple Choice The company's planned level of activity was 2,000 hours and its actual level of activity was 1,850 hours. How much supplies expense would be included in the flexible budget? $10,535 $9,365 $9,065 $ 3,000 $9,800 $ 4.90g $150 + $0.75g Submarrow_forwardKorvanis Corporation operates a Medical Services Department for its employees. Charges to the company’s operating departments for the variable costs of the Medical Services Department are based on the actual number of employees in each department. Charges for the fixed costs of the Medical Services Department are based on the long-run average number of employees in each operating department. Variable Medical Services Department costs are budgeted at $58 per employee. Fixed Medical Services Department costs are budgeted at $683,200 per year. Actual Medical Services Department costs for the most recent year were $105,800 for variable costs and $689,000 for fixed costs. Data concerning employees in the three operating departments follow: Cutting Milling Assembly Budgeted number of employees 604 287 918 Actual number of employees for the most recent year 504 387 818 Long-run average number of employees 720 480 1,200 Required: 1. Determine the Medical Services…arrow_forward8. Tabarez 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 budgeted based on the number of cases produced by the operating departments during the peak period. Data appear below: Maintenance Department: Budgeted variable cost Budgeted total fixed cost $ 2 per case $ 1,140,000 $ 239,400 $ 1,157,980 Actual total variable cost Actual total fixed cost Paints Division: 30% Percentage of peak period capacity required Budgeted cases Actual cases 29,000 29,040 Stains Division: 70% Percentage of peak period capacity required Budgeted cases Actual cases 85,000 84,960 For performance evaluation purposes, how much Maintenance Department cost should be charged to the Stains Division at the end of the year? A. $989,002 B. $1,041,416…arrow_forward
- Korvanis Corporation operates a Medical Services Department for its employees. Charges to the company's operating departments for the variable costs of the Medical Services Department are based on the actual number of employees in each department. Charges for the fixed costs of the Medical Services Department are based on the long-run average number of employees in each operating department. Variable Medical Services Department costs are budgeted at $55 per employee. Fixed Medical Services Department costs are budgeted at $659,700 per year. Actual Medical Services Department costs for the most recent year were $105,100 for variable costs and $665,000 for fixed costs. Data concerning employees in the three operating departments follow: Rudgeted number of employees Actual number of employees for the most recent year Long-run average number of employees Cutting 610 510 990 Milling 287 387 660 Assembly 909 809 1,650 Required: 1. Determine the Medical Services Department charges for the…arrow_forwardKorvanis Corporation operates a Medical Services Department for its employees. Charges to the company's operating departments for the variable costs of the Medical Services Department are based on the actual number of employees in each department. Charges for the fixed costs of the Medical Services Department are based on the long-run average number of employees in each operating department. Variable Medical Services Department costs are budgeted at $57 per employee. Fixed Medical Services Department costs are budgeted at $639,300 per year. Actual Medical Services Department costs for the most recent year were $105,800 for variable costs and $645,000 for fixed costs. Data concerning employees in the three operating departments follow: Budgeted number of employees Cutting 604 Milling 293 Assembly 918 Actual number of employees for the most recent year 504 393 Long-run average number of employees 1,050 700 818 1,750 Required: 1. Determine the Medical Services Department charges for the…arrow_forwardProblem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1) Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded: Supplying Department Transactions IT Operations Direct cost IT From: Operations Transactions Transactions Total 8 10% 70% $ 310,000 IT Using Department Operations Costs Operations S 250,000 $ 750,000 670,000 X 1,510,000 x 8 8 8 $ 730,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. Answer is complete but not entirely correct. Allocated to: Transactions $ 250,000 $ 2,233,333 x 8 30% 8 $ 1,570,000 $ Retail Retail 0X $ 0.x 0x 0 Commercial S $ 3,770,000 78% 30% 10% 833,333 X 0x 0x 833,333 Commercial 36% 38% 28% $ 2, 320, 000arrow_forward
- TBBSBM764 Corporation's delivery department provides service for two operating departments of the company. Variable costs of the TBBSBM764's delivery department are allocated based on the number of deliveries made to each department in a given period. TBBSBM764's delivery department's fixed costs are budgeted to be 25% of total costs and are allocated based on the peak period needs of each operating department. Data for last year are given below: Delivery Department: Actual Fixed Costs Actual Variable Costs (ID#346818) Total Budgeted Costs $19,410 $40,590 $48,000 Peak period needs Actual deliveries Budgeted deliveries Operating Dept 1 10,000 deliveries 8,958 8,000 Operating Dept 2 5,000 deliveries 3,452 4,000 Q.) What amount of the TBBSBM764's delivery department's actual costs should not be allocated to the operating departments? A.) $ Prev 1 of 25 Next > MacBook Airarrow_forwardQuestion V – Allocate Costs with Reciprocal Method (8 Marks) Anchor Company manufactures a variety of tool boxes. They have two operating divisions – Corporate Sales and Consumer Sales – and two support divisions –Admin and IT. Each operating division operates independently. Anchor uses the number of employees to allocate Admin costs and computer processing time to allocate IT costs. The following data are available for the month: SUPPORT DEPT OPERATING DEPT Admin IT Corp Sales Cons. Sales Budgeted costs before interdivision allocations $170,000 $400,000 $2,000,000 $1,000,000 Admin budgeted # of employees 40 80 70 IT budgeted # of processing time (in minutes) 600 4,000 3,400 REQUIRED: Using the reciprocal method, allocate the support department costs.arrow_forwardProblem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1) Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded: Supplying Department Transactions IT Operations Direct cost IT From: Operations Transactions Transactions Total 8 18% 70% $ 310,000 IT Costs Operations S 250,000 $ 750,000 670,000 x 1,510,000 x Using Department Operations 8 8 8 $ $ 730,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. x Answer is complete but not entirely correct. Allocated to: Transactions 250,000 XS 2,233,333 x $ 8 30% 8 $ 1,570,000 $ 3,770,000 Retail 0X X $ Retail OX 0x 0 Commercial S 70% 30% 18% 833,333 X 0x 0 x 833,333 Commercial 30% 38% 28 $ 2,320,000arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education