LO.4 (OH allocation using cost drivers) Wyeth Corp. has decided to implement an activity-based costing system for its in-house legal department. The legal department's primary expense is professional salaries, which are estimated for associated activities as follows: Reviewing supplier or customer contracts (Contracts) $270,000 Reviewing regulatory compliance issues (Regulation) 375,000 Court actions (Court) 862,500 Management has determined that the appropriate cost allocation base for Con- tracts is the number of pages in the contract reviewed, for Regulation is the number of reviews, and for Court is number of hours of court time. For 2010, the legal department reviewed 500,000 pages of contracts, responded to 750 regulatory review requests, and logged 3,750 hours in court. a. Determine the allocation rate for each activity in the legal department. b. What amount would be charged to a producing department that had 21,000 pages of contracts reviewed, made 27 regulatory review requests, and consumed 315 pro- fessional hours in court services during the year?

LO.4 (OH allocation using cost drivers) Wyeth Corp. has decided to implement an activity-based costing system for its in-house legal department. The legal department's primary expense is professional salaries, which are estimated for associated activities as follows: Reviewing supplier or customer contracts (Contracts) $270,000 Reviewing regulatory compliance issues (Regulation) 375,000 Court actions (Court) 862,500 Management has determined that the appropriate cost allocation base for Con- tracts is the number of pages in the contract reviewed, for Regulation is the number of reviews, and for Court is number of hours of court time. For 2010, the legal department reviewed 500,000 pages of contracts, responded to 750 regulatory review requests, and logged 3,750 hours in court. a. Determine the allocation rate for each activity in the legal department. b. What amount would be charged to a producing department that had 21,000 pages of contracts reviewed, made 27 regulatory review requests, and consumed 315 pro- fessional hours in court services during the year?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 23E: Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating...

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Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating support service costs by switching to the direct method. Required: 1. Allocate the costs of the support departments to the producing departments using the direct method. (Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar.) 2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.)
E9.4 (LO 3), AP Olivander Company’s traditional costing system has accommodated only one pool for MOH to date, allocated based on DL hours. After conversing with the production managers, however, the company’s owners have gained insights on the key activities that generate cost in the plant. The three key activities, and the cost drivers identified for each, are as follows, along with their budgeted costs and usages for the year. Activity. Budgeted Cost Budgeted Quantity of Cost Driver Machine setup. $120,000 3,000 production runs Material moves 80,000 1,600,000 pounds of material moved Assembly 250,000 40,000 direct labor hours Total $450,000 Required a. Calculate the MOH rate under the current traditional costing system with one MOH pool and one cost driver. b. Calculate the activity-based rates using the…
Lewisville CorporationIn order to better match cost with revenues, Lewisville Corporation distributes its service department overhead costs to producing departments. Information for April is presented here. Maintenance Utilities Overhead costs incurred $18,700 $9,000 Service provided to: Maintenance Dept. 10% Utilities Dept. 20% Producing Dept. A 40% 30% Producing Dept. B 40% 60% Assume that Lewisville Corporation distributes service department overhead costs based on the algebraic method. What would be the formula to determine the total maintenance costs? Group of answer choices M = $18,700 + .10U M = $9,000 + .20U M = $18,700 + .30U + .40A + .40B M = $27,700 + .40A + .40B
Management of XYZ Media has decided to allocate the costs of the paper's two service/support departments (administration and human resources) to the two revenue generating/producing departments (advertising and circulation.) Administration costs are to be allocated on the Pesos of Assets Employed. ; Human Resources costs are to be allocated on the basis of Number of Employees. The following costs and allocated bases are available. (Convert the fractions on the allocated bases into percentages rounded to the whole number). Department - Administration: Direct Costs - P781,500 Number of Employees - 10 Pesos of Assets Employed - P387,100 Department - Human Resources: Direct Costs - P492,700 Number of Employees - 7 Pesos of Assets Employed - P291,700 Department - Advertising: Direct Costs - P957,800 Number of Employees - 12 Pesos of Assets Employed - P762,400 Department - Circulation: Direct Costs - P1,352,600 Number of Employees - 25 Pesos of Assets Employed - P1,870,300…
Jansen Corp. has decided to implement an activity-based costing system for its in-house legal department. The legal department’s primary expense is professional salaries, which are estimated for associated activities as follows: Reviewing supplier or customer contracts (Contracts) P270,000 Reviewing regulatory compliance issues (Regulation) 375,000 Court actions (Court) 862,500 Management has determined that the appropriate cost allocation base for Contracts is the number of pages in the contract reviewed, for Regulation is the number of reviews, and for Court is number of hours of court time. For 2010, the legal department reviewed 450,000 pages of contracts, responded to 750 regulatory review requests, and logged 3,750 hours in court. How can the developed rates be used for evaluating output relative to cost incurred in the legal department? What alternative does the firm have to maintaining an internal legal department and how might this choice affect costs?
Jansen Corp. has decided to implement an activity-based costing system for its in-house legal department. The legal department’s primary expense is professional salaries, which are estimated for associated activities as follows: Reviewing supplier or customer contracts (Contracts) P270,000 Reviewing regulatory compliance issues (Regulation) 375,000 Court actions (Court) 862,500 Management has determined that the appropriate cost allocation base for Contracts is the number of pages in the contract reviewed, for Regulation is the number of reviews, and for Court is number of hours of court time. For 2010, the legal department reviewed 450,000 pages of contracts, responded to 750 regulatory review requests, and logged 3,750 hours in court. Determine the allocation rate for each activity in the legal department. What amount would be charged to a producing department that had 21,000 pages of contracts reviewed, made 27 regulatory review requests, and consumed 315 professional hours…
What are the total costs of the production departments (clothing and shoes) after the support department costs of information technology and human resources have been allocated using (a) the direct method, (b) the step-down method (allocate information technology first), (c) the step-down method (allocate human resources first), and (d) the reciprocal method? Assume that all of the work of the IT department could be outsourced to an independent company for $97.50 per hour. If Sportz no longer operated its own IT department, 30% of the fixed costs of the IT department could be eliminated. Should Sportz outsource its IT services?
Boysenberry Corp. has two support departments, Personnel (P) and Maintenance (M), and two producing departments, Blending (B) and Finishing (F). Estimated direct costs and percentages of services used by these departments are as follows: Used by Department Support Dept. P M B F P - 10% 60% 30% M 10% - 40% 50% Direct costs Required: $9,000 $13,500 $40,000 $35,000 Prepare a schedule allocating the support department costs to the producing departments using the direct allocation method. Prepare a schedule allocating the support department costs to the producing departments using the sequential allocation method.
Bell, Biv, and Devoe Company had the following activities, estimated indirect activity costs, and allocation bases: Activities Indirect Activity Costs Allocation Base Account inquiry (hours) $85,200 2,200 Account billing (lines) $55,000 34,000 Account verification (accounts) $39,250 25,500 Correspondence (letters) $71,000 9,000 The company uses activity-based costing. The above activities are used by Departments P and Q as follows: Department P Department Q Account inquiry (hours) 400 800 Account billing (lines) 10,000 4,000 Account verification (accounts) 6,000 7,000 Correspondence (letters) 1,000 2,000 What is the cost per driver unit for the account inquiry activity? (Round all answers to two decimal places.) $1.62 $9.47 $7.89 $38.73
The management of Hamano Corporation would like for you to analyze their repair costs, which are listed below: Machine-Hours Repair Costs April 2,148 $ 33,102 May 2,177 $ 33,120 June 2,134 $ 33,097 July 2,214 $ 33,120 August 2,119 $ 33,030 September 2,230 $ 33,184 October 2,145 $ 33,071 November 2,225 $ 33,157 Management believes that repair cost is a mixed cost that depends on the number of machine-hours. Using the least-squares regression method, the estimates of the variable and fixed components of repair cost would be closest to: Multiple Choice $1.25 per machine-hour plus $30,387 per month $0.80 per machine-hour plus $31,953 per month $0.98 per machine-hour plus $30,978 per month 15.00 per machine-hour plus $33,917 per month
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Woodstock Binding has two service departments, IT (Information Technology) and HR (Human Resources), and two operating departments, Publishing and Binding. Management has decided to allocate IT costs on the basis of IT Tickets (issued with each IT request) in each department and HR costs on the basis of employees in each department. The following data appear in the company records for the current period: IT HR Publishing Binding IT tickets 0 1,500 2,400 2,100 Employees 16 0 24 40 Department direct costs $ 150,000 $ 247,500 $ 430,000 $ 390,000 Required: Use the step method to allocate the service costs, using the following:The order of allocation starts with IT.Note: Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations. Costs Allocated To: Costs Allocated To: Costs Allocated To: Costs Allocated To: From: IT HR Pubishing Binding Service department costs IT HR Total Costs $ $ $ $