Reference no: EM131774976

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 yer 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 correct answer is C ($25,000).