The Fixed Costs of Operating the Maintenance Facility of General

question 135

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 the year 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 budgeted usage for fixed operating costs and actual usage for variable operating costs?

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Definitions:

Bullwhip Effect

A phenomenon in supply chains where variations in demand cause progressively larger variations in supply, leading to inefficiency and excess inventory.

Distributer

A company or individual responsible for the movement of goods from a manufacturer to the point of sale, usually adding value through storage, transportation, and marketing.

Large Order

A request for a significantly large quantity of goods or services.

Postponement

A supply chain strategy that delays the final activities in the production process (such as assembly, packaging, or shipping) until the latest possible time to reduce inventory and increase customization.