Delta Railroad Has Two Operating Divisions--Freight and Passenger

question 28

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 fixed costs should be retained in that department as a spending variance?

• A)$0
• B)$15,000
• C)$12,000
• D)$18,000

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Definitions:

Lenders

Individuals or institutions that provide funds to borrowers under the expectation of being repaid with interest.

Borrowers

Borrowers are individuals or entities that take loans from lenders, with the promise of repaying the loan amount along with interest after a specified duration.

Closed Economy

An economic system that does not interact with other economies in terms of trade, investment, or migration and relies solely on its own resources and internal production.

Variable Y

A symbolic representation of a dependent variable that is subject to change based on other variables' values within a mathematical function or an experiment.