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 $165,200 per year, consisting of $0.24 per ton variable cost and $115,200 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 51% of the Transport Services Department’s capacity and the Southern Plant requires 49%.
during the year, the transport services department actually hauled 115,000 tons of ore to the northern plant and 61,200 tons to the southern plant. the transport services department incurred $371,000 in cost during the year, of which $53,900 was variable cost and $317,100 was fixed cost.
Required:
1. How much of the $52,400 in variable cost should be charged to each plant?
2. How much of the $317,600 in fixed cost should be charged to each plant?
3. How much of the $370,000 in the Transport Services Department cost should be treated as a spending variance and not charged to the plants?