Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel mills-the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $309,500 per year, consisting of $0.23 per ton variable cost and $259,500 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 67% of the Transport Services Department's capacity and the Southern Plant requires 33%. During the year, the Transport Services Department actually hauled 120,000 tons of ore to the Northern Plant and 68,400 tons to the Southern Plant. The Transport Services Department incurred $368,000 in cost during the year, of which $53,800 was variable cost and $314,200 was fixed cost. Required: 1. How much of the Transport Services Department's variable costs should be charged to each plant? 2. How much of the $314,200 in fixed cost should be charged to each plant? 3. Should any of the Transport Services Department's actual total cost of $368,000 be treated as a spending variance and not charged to the plants?

Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel mills-the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $309,500 per year, consisting of $0.23 per ton variable cost and $259,500 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 67% of the Transport Services Department's capacity and the Southern Plant requires 33%. During the year, the Transport Services Department actually hauled 120,000 tons of ore to the Northern Plant and 68,400 tons to the Southern Plant. The Transport Services Department incurred $368,000 in cost during the year, of which $53,800 was variable cost and $314,200 was fixed cost. Required: 1. How much of the Transport Services Department's variable costs should be charged to each plant? 2. How much of the $314,200 in fixed cost should be charged to each plant? 3. Should any of the Transport Services Department's actual total cost of $368,000 be treated as a spending variance and not charged to the plants?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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