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:

Ambrosia

Often referred to in mythology as the food or drink of the gods, typically signifying something with an exquisite taste or smell.

Red Price

There is no standard definition for this term in economics; it may be used informally to denote a specific pricing strategy or condition but lacks a general meaning.

Bubble Gum

A variety of gum that can be blown into a bubble from the mouth.

Ambrosia

In mythology, ambrosia is often considered the food or drink of the gods, granting longevity or immortality upon consumption.