(Appendix 11B) Nafth Company Has an Equipment Services Department That

question 32

Multiple Choice

(Appendix 11B) Nafth Company has an Equipment Services Department that performs all needed maintenance work on the equipment in the company's Fabrication and Assembly Departments. Costs of the equipment Services Department are charged to the Fabrication and Assembly Departments on the basis of direct labor-hours. Data on direct labor-hours for last year follow:
For the year just ended, the company budgeted its variable maintenance costs at $210,000 for the year. Actual variable maintenance costs for the year totaled $255,000.
-How much (if any) of the $255,000 in variable maintenance cost should not be charged to the Fabrication and Assembly Departments?

• A) $0
• B) $15,000
• C) $45,000
• D) $60,000

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Definitions:

Times Interest Earned Ratio

A financial metric indicating how well a company can meet its interest obligations based on its earnings before interest and taxes.

Depreciation Expense

Dividing the expenditure of a solid asset over its effective life.

EBIT

Earnings Before Interest and Taxes, a financial metric that calculates a company's profitability from operations without the effects of interest and tax expenses.

Cash Coverage Ratio

A financial metric that measures a company's ability to cover its debt obligations with its cash and cash equivalents.