Nathan Company has an Equipment Services Department that performs all needed maintenance work on the...
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Accounting
Nathan Company has an Equipment Services Department that performs all needed maintenance work on the equipment in the company's Fabrication and Assembly Departments. Cost of the equipment Services Department are allocated to the Fabrication and Assembly Departments on the basis of direct labor-hours. Data for the year just completed follow:
| Fabrication | Assembly | Total | |
| Budgeted direct labor-hours | 20,000 | 60,000 | 80,000 |
| Actual direct labor-hours | 30,000 | 70,000 | 100,000 |
| Peak-period direct labor-hours | 40,000 | 80,000 | 120,000 |
For the year just ended, the company budgeted its variable maintenance costs at $200,000 for the year. Actual variable maintenance costs for the year totaled $275,000.
How much (if any) of the $275,000 in variable maintenance cost should NOT be charged to the Fabrication and Assembly Departments?
a. $0.
b. $75,000.
c. $25,000.
d. $108,000.
The answer is C. Please show all steps.
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