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

This preview shows pages 1–2. Sign up to view the full content.

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

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern