Trenron, Inc

question 23

Essay

Trenron, Inc. has a maintenance department that provides services to the company's two operating departments. The variable costs of the maintenance department are charged on the basis of the number of maintenance hours logged in each department. Last year, budgeted variable maintenance costs were $8.60 per maintenance hour and actual variable maintenance costs were $8.75 per maintenance hour.
The budgeted and actual maintenance hours for each operating department for last year appear below: Required:
a. Compute the amount of variable maintenance department cost that should have been charged to each operating department at the end of the year for performance evaluation purposes.
b. Compute the amount of actual variable maintenance department cost that should not have been charged to the operating departments at the end of the year for performance evaluation purposes.

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Definitions:

Base Year

A reference year against which economic growth, prices, or quantities are measured in index numbers or other economic data series.

Real Wages

Wages adjusted for inflation, reflecting the purchasing power of income and the true cost of living for workers.

Productivity

The efficiency of production of goods or services expressed as the ratio of output to inputs used, a key determinant of economic performance.

Directly Proportional

A relationship between two variables where an increase in one results in a proportional increase in the other.