ACIS
Homework 12

# Homework 12 - Exercise 12-1 Step 1 is to determine the...

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Exercise 12-1 Step 1 is to determine the allocation rate: Fringe benefit cost \$360,000 Allocation rate = –––––––––––––––––––– = ––––––––––– = \$7,200 per employee No. of employees 50 (Cost driver) Step 2 is to assign the cost by multiplying the allocation  rate by the weight of the base (i.e., cost driver) for each  division: Division Allocation Rate x Weight of Base = Allocated Cost A \$7,200 x 36 employees = \$259,200 B \$7,200 x 14 employees = 100,800 Total allocated cost \$360,000 Exercise 12-4 a. Step 1 is to determine the allocation rate: Allocation rate Overhead cost \$250,000 for = ––––––––––––––– = ––––––––––– = \$100 per machine hour Overhead cost Machine hours 2,500 Step 2 is to assign the cost by multiplying the allocation  rate by the weight of the base (i.e., cost driver): Product Allocation Rate x Weight of Base = Allocated Cost

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Cups \$100 x 500 = \$  50,000 Tablecloths \$100 x 800 = 80,000 Bottles \$100 x 1,200 = 120,000 Total \$250,000 b. Ritchey may have chosen machine hours as the cost driver  because   the   manufacturing   process   could   be   machine- intensive, or a clear relationship between machine hours  and the use of indirect costs could exist.
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• Fall '07
• CMEasterwood
• Accounting, allocation rate, supervisor Department N Direct, supervisor Department M Salary, Department M Direct

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