James Co has two producing departments. Each producing department is held responsible for a share of the costs of the IT support department.
Actual and budgeted data are as follows:
- Support department hours used in 2012:
- Department X 8,000
- Department Y 16,000
- Total hours 24,000
- Support department costs in 2012:
- Actual support department variable costs $1,392,000
- Budgeted fixed service center costs for 2012 $240,000
- Actual fixed service center costs for 2012 $255,000
- Budgeted variable rate per hour $55.00
Normal support department usage is 12,000 hours each for Department X and Department Y.Calculate the amount to be used for charging the IT costs to the producing departments for budget purposes using a single charge rate.Calculate the amount to be used for charging the IT costs to the producing departments for budget purposes using a multiple charge rate: i.e. allocate fixed costs separately from the variable costs.Allocate the actual 2012 costs of the support department to the producing departments using a multiple charge rate: i.e. allocate fixed costs separately from the variable costs.Why are the cost allocations using actual costs different from the cost allocations for budget purposes?Is Dept X going to show a favorable or unfavorable budget variance for their IT costs for the year 2012? What is the amount?