Chapter7_Solutions

# Chapter7_Solutions - 79 1 Allocation ratios Square feet Machine hours Purchase orders Cost assignment Power(0.2500 \$120,000(0.7500 \$120,000 General

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7–9 1. Allocation ratios: Sunscreen Lip Balm Square feet. ................... 0.5333 0.4667 Machine hours. ............. 0.2500 0.7500 Purchase orders. .......... 0.3333 0.6667 Cost assignment: Power: (0.2500 × \$120,000). ......... \$ 30,000 (0.7500 × \$120,000). ......... \$ 90,000 General factory: (0.5333 × \$540,000). ......... 287,982 (0.4667 × \$540,000). ......... 252,018 Purchasing: (0.3333 × \$220,000). ......... 73,326 (0.6667 × \$220,000). ......... 146,674 Direct costs. ............................. 137,500 222,500 Total. ................................. \$ 528,808 \$ 711,192 2. Departmental overhead rates: Sunscreen: \$528,808/8,000 = \$66.10 per machine hour Lip balm: \$711,192/24,000 = \$29.63 per machine hour

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7–10 1. Assume the support department costs are allocated in order of highest to lowest cost: general factory, purchasing, and power. General Power Factory Purchasing Sunscreen Lip Balm Square feet. ................. 0.1250 0.1250 0.4000 0.3500 Machine hours. ........... 0.2500 0.7500 Purchase orders. ........ 0.1000 0.3000 0.6000 General Power Factory Purchasing Sunscreen Lip Balm Direct costs. ................... \$120,000 \$540,000 \$220,000 \$137,500 \$ 222,500 General factory: (0.1250)(\$540,000). ... 67,500 (67,500) (0.1250)(\$540,000). ... (67,500) 67,500 (0.4000)(\$540,000). ... (216,000) 216,000 (0.3500)(\$540,000). ... (189,000) 189,000 Purchasing: (0.1000)(\$287,500). ... 28,750 (28,750) (0.3000)(\$287,500). ... (86,250) 86,250 (0.6000)(\$287,500). ... (172,500) 172,500 Power: (0.2500)(\$216,250). ... (54,063) 54,063 (0.7500)(\$216,250). .. (162,188 ) 162,188 Total. ............................... \$ (1 )* \$ 0 \$ 0 \$493,813 \$746,188 *Rounding error. 2. Sunscreen: \$493,813/8,000 = \$61.73 per machine hour (rounded) Lip balm: \$746,188/24,000 = \$31.09 per machine hour (rounded) 7–11 1. Maintenance Personnel Assembly Painting Square footage. .............. 0.20 0.40 0.40 Number of employees. .. 0.10 0.24 0.66
P = 60,000 + 0.2M M = 200,000 + 0.1P P = 60,000 + 0.2(200,000 + 0.1P) M = 200,000 + 0.1(102,041) P = 60,000 + 40,000 + 0.02P M = 200,000 + 10,204 0.98P = 100,000 M = 210,204 P = 102,041

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7–11 Concluded Allocate Allocate Total after Direct Cost Maintenance a Personnel b Allocation Maintenance. .......... \$200,000 \$(210,204) \$ 10,204 \$ 0 Personnel. ............... 60,000 42,041 (102,041) 0 Assembly. ............... 43,000 84,082 24,490 151,572 Painting. .................. 74,000 84,082 67,347 .................... 225,429 \$ 377,000 \$ 377,001 * *Difference due to rounding error. a (0.20 × \$210,204) = \$42,041 b (0.10 × \$102,041) = \$10,204 (0.40 × \$210,204) = \$84,082 (0.24 × \$102,041) = \$24,490 (0.40 × \$210,204) = \$84,082 (0.66 × \$102,041) = \$67,347 2. Departmental rates: Assembly: \$151,572/25,000 = \$6.06 per direct labor hour Painting: \$225,429/40,000 = \$5.64 per direct labor hour 7–14 1. Units Percent × Joint Cost = Allocated Joint Cost Andol. ......... 1,000 0.1250 \$100,000 \$ 12,500 Incol. ........... 1,500 0.1875 100,000 18,750 Ordol. .......... 2,500
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## This note was uploaded on 04/06/2011 for the course ECON 3332 taught by Professor Craig during the Spring '11 term at Rensselaer Polytechnic Institute.

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Chapter7_Solutions - 79 1 Allocation ratios Square feet Machine hours Purchase orders Cost assignment Power(0.2500 \$120,000(0.7500 \$120,000 General

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