Delta Railroad Has Two Operating Divisions--Freight and Passenger

question 23

Multiple Choice

Delta Railroad has two operating divisions--Freight and Passenger. The Maintenance Department serves both divisions. Variable Maintenance Department costs are budgeted at $12 per thousand miles. The fixed Maintenance Department costs are budgeted at $800,000 per year. The level of the fixed Maintenance Department costs are determined by the peak-period requirements. Data for last year follow:

During last year, the Maintenance Department actually incurred $650,000 in variable costs and $815,000 in fixed costs.
-For performance evaluation purposes, how much of the Maintenance Department's actual variable costs should be retained in that department as a spending variance?

• A)$74,000
• B)$0
• C)$50,000
• D)$60,000

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Definitions:

Technology Leader

An individual or organization pioneering in the development, utilization, and application of new technologies, setting trends in the industry.

Management By Objectives (MBO)

A management strategy where objectives are defined so that employees understand what they need to achieve.

Type Of Uncertainty

Refers to different situations in which the probability of outcomes or future events is unknown, common in business and economics.

Management By Objectives (MBO) Procedure

A performance management approach where managers and employees collaborate to set, monitor, and achieve specific objectives.