help - Management Accounting , 5 th edition by Anthony...

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Unformatted text preview: Management Accounting , 5 th edition by Anthony Atkinson, Robert Kaplan, Ella Mae Matsumura, and S. Mark Young. 3-23 Job order costing, consulting Mackenzie Consulting computes the cost of each consulting engagement by adding a portion of firmwide support costs to the labor cost of the consultants on the engagement. The support costs are assigned to each consulting engagement using a cost driver rate based on consultant labor costs. Mackenzie Consultings support costs are $5 million per year, and total consultant labor cost is estimated at $2.5 million per year. a. What is Mackenzie Consultings support cost driver rate? b. If the consultant labor cost on an engagement is $25,000, what costs will Mackenzie Consulting compute as the total cost of the consulting engagement? 3-25 Single rate versus departmental rates Western Wood Products has two production departments: cutting and assembly. The company has been using a single predetermined cost driver rate based on plantwide direct labor hours. That is, the plantwide cost driver rate is computed by dividing plantwide costs by total plantwide direct labor hours. The estimates for support costs and quantities of cost drives for 2006 follow: Cutting Assembly Total Manufacturing support $25,000 $35,000 $60,000 Direct labor hours 1,000 3,000 4,000 Machine hours 4,000 2,000 6,000 a. What was the single plantwide cost driver rate for 2006? b. Determine departmental cost driver rates based on direct labor hours for assembl and machine hours for cutting. c. Provide reasons why Western Wood might use the method in (a) or in (b). 3-26 Fluctuating cost driver rates, effect on markup pricing Morrison Company carefully records its costs because it bases prices on the cost of the goods it manufactures. Morrison also carefully records its machine usage and other operational information. Manufacturing costs are computed monthly, and prices for the next month are determined by adding a 20% markup to each products manufacturing costs. The support activity cost driver rate is based on machine hours, shown below: Month Actual Machine Hours January 1,350 February 1,400 March 1,500 April 1,450 May 1,450 June 1,400 July 1,400 August 1,400 September 1,500 October 1,600 November 1,600 December 1,600 Profits have been acceptable until the past year, but Morrison has recently faced increased competition. The marketing manager reported that Morrisons sales force finds the companys pricing puzzling. When demand is high, the companys prices are low, and when demand is low, the companys prices are high. Practical capacity is exceeded in some months by operating the machines overtime beyond regular shift hours. Monthly machine- related costs, all fixed, are $70,000 per month. a.a....
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help - Management Accounting , 5 th edition by Anthony...

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