New 663 - Total cost = $65,477.94 $ 82,706.76 = $148,184.7...

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Question: Medusa Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory. Information about the departments is presented below: Number of Number of Square Department Costs Employees Feet Occupied Payroll (S1) $137,000 2 2,000 Maintenance (S2) $220,000 8 64,000 Molding (P1) 65 100,000 Finishing (P2) 44 60,000 Packaging (P3) 17 40,000 Medusa uses the direct method to allocate costs. Round all answers to the nearest dollar. What amount of the payroll department costs will be allocated to the molding department? Answer: Total employees = 2 + 8 + 65 + 44 + 17 = 136 Total Square feet area = 2,000 + 64,000 + 100,000 + 60,000 + 40,000 = 266,000 Molding dep cost Payroll= $ 137,000/136 x 65= $65,477.94 Rent= $ 220,000/266000 x 100000=$ 82,706.76
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Unformatted text preview: Total cost = $65,477.94 + $ 82,706.76 = $148,184.7 Queston: David and Beth Sheba run a health food store. Their top selling item is called Heavenly Kelp. The annual demand for this is 810 units, and demand is constant throughout the year. The cost of placing an order is $20, while the holding cost per unit per year is $4. (A) How many orders per year should be placed if they wish to minimize their total cost? (B) What is the minimum possible annual holding and ordering cost? Answer: A) Economic Order Quantity = Sqrt( 2 x A x O / C) Where, A = Annual demand = 810 units O = Ordering cost per order = $20 C = Carrying Cost per unit - $4 So, EOQ = Sqrt( 2 x 810 x $20 / $4) = 90 units. Number of orders to be placed to minimize the total cost = A / EOQ = 810 / 90 = 9 orders. B) Annual holding cost = Average inventory x Holding cost per unit per annum = (EOQ / 2) x $4 = (90 / 2) x $4 = $180 Annual Ordering Cost = Number of orders x Ordering cost per unit per annum = 9 x $20 = $180 So, total minimum possible cost = $180 + $180 = $360...
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