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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