Has decided to establish a machine maintenance

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Unformatted text preview: proach? Under the three-cost-center approach? Make your computations below. For One Cost Center For Three Cost Centers ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• Answer: If we use only one cost center, our computation would look as follows: Direct and administrative salaries ($40,000+$50,000+$35,000) Supplies (administrative and customer-related) ($14,425+$13,575+$12,000) Contracted services Total costs Hours of service Cost per unit $125,000 40,000 10,000 $175,000 15,625 $11.20 If we were to use three cost centers, our analysis would give the same result, but with a very different structure: Cost items Administration Salaries $40,000 Supplies 14,425 Contracted services ______ Total $54,425 Hours of service — (1) Cost per hour of service C ost centers Mowing Special Projects $50,000 $35,000 13,575 12,000 10,000 $73,575 $47,000 11,772 3,853 $6.25 $12.20 Total...
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