Hannibal Steel Company's Transport Services Department 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 $193,700 per year, consistingof $0.16 per ton variable cost and $143,700 fixed cost. The level of fixed cost is determined by peak-period requirements. During thepeak period, the Northern Plant requires 65% of the Transport Services Department's capacity and the Southern Plant requires 35%.During the year, the Transport Services Department actually hauled 120,000 tons of ore to the Northern Plant and 52,800 tons to theSouthern Plant. The Transport Services Department incurred $361,000 in cost during the year, of which $53,700 was variable and$307,300 was fixed.Required:1. How much of the Transport Services Department's variable costs should be charged to each plant?2. How much of the Transport Services Department's fixed costs should be charged to each plant?3. How much, if any, of the Transport Services Department's actual total cost of $361,000 should be treated as a spending varianceand not charged to the plants?

To solve this problem, we need to allocate the variable and fixed costs of the Transport Services…

Answered: Hannibal Steel Company's Transport…

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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