The Fixed Costs of Operating the Maintenance Facility of General

question 3

Essay

The fixed costs of operating the maintenance facility of General Hospital are $4,500,000 annually. Variable costs are incurred at the rate of $30 per maintenance-hour. The facility averages 40,000 maintenance-hours a year. Budgeted and actual hours per user for 20X3 are as follows:
Assume that budgeted maintenance-hours are used to calculate the allocation rates.
Required:
a. If a single-rate cost-allocation method is used, what amount of maintenance cost will be budgeted for each department?
b. If a single-rate cost-allocation method is used, what amount of maintenance cost will be allocated to each department based on actual usage?
c. If a dual-rate cost-allocation method is used, what amount of maintenance cost will be budgeted for each department?
d. If a dual-rate cost-allocation method is used, what amount of maintenance cost will be allocated to each department based on actual usage? Based on budgeted usage for fixed operating costs and actual usage for variable operating costs?

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Definitions:

Compounded Semi-Annually

Compounded semi-annually refers to the process where interest on an investment or loan is calculated and added to the principal balance twice a year.

35 Years

A period of thirty-five years, often referred to in the context of long-term investments or life events planning.

Invested

To distribute financial resources aiming for potential benefits down the line, including income or profits.

Investment

The allocation of resources, usually money, in the expectation of generating an income or profit over time.