The fixed costs of operating the maintenance facility of General Hospital are $4,500,000 annually. Variable costs are incurred at the rate of $30 per maintenance-hour. The facility averages 40,000 maintenance-hours a year. Budgeted and actual hours per user for 2017 are as follows: Budgeted hours Actual hours Building and grounds 10,000 12,000 Operating and emergency 8,000 8,000 Patient care 21,000 22,000 Administration 1,000 1,200 Total 40,000 43,200 Assume that budgeted maintenance-hours are used to calculate the allocation rates. If a single-rate costallocation method is used, what amount of maintenance cost will be budgeted for each department
Variance Analysis
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Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
The fixed costs of operating the maintenance facility of General Hospital are $4,500,000 annually.
Variable costs are incurred at the rate of $30 per maintenance-hour. The facility averages 40,000
maintenance-hours a year. Budgeted and actual hours per user for 2017 are as follows:
Budgeted hours Actual hours
Building and grounds 10,000 12,000
Operating and emergency 8,000 8,000
Patient care 21,000 22,000
Administration 1,000 1,200
Total 40,000 43,200
Assume that budgeted maintenance-hours are used to calculate the allocation rates. If a single-rate costallocation method is used, what amount of maintenance cost will be budgeted for each department?
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