The Maintenance Department's Costs Are Allocated to Other Departments Based

question 1

Essay

The maintenance department's costs are allocated to other departments based on the number of hours of maintenance use by each department. The maintenance department has fixed costs of $500,000 and variable costs of $30 per hour of maintenance provided. The variable costs include the salaries of the maintenance workers. More maintenance workers can be added if greater maintenance is demanded by the other departments without affecting the fixed costs of the maintenance department. The maintenance department expects to provide 10,000 hours of maintenance.
Required:
a. What is the application rate for the maintenance department?
b. What is the additional cost to the maintenance department of providing another hour of maintenance?
c. What problem exists if the managers of other departments can choose how much maintenance to be performed?
d. What problem exists if the other departments are allowed to go outside the organization to buy maintenance services?

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Definitions:

Coleoptera

An order of insects known as beetles, characterized by their hard forewings (elytra) which cover the hind wings.

Arachnids

Land-dwelling arthropods with no antennae and four pairs of walking legs; spiders, scorpions, mites, and ticks.

Earthworms

Invertebrate animals belonging to the phylum Annelida, known for their role in aerating the soil and enhancing soil fertility.

Crop Yields

The measure of productivity of a crop within a specific area, often influenced by factors like weather conditions, soil quality, and farming practices.