Pitt Jones Company had the following activities, allocated costs, and allocation bases: Activities Account inquiry (hours) Account billing (lines) Account verification (accounts) Correspondence (letters) Allocated Costs Allocation Base $60,000 $30,000 $15,000 $10,000 2,000 hours 20,000 lines 20,000 accounts 1,000 letters The above activities are carried out at two of their regional offices. Account inquiry (hours) Account billing (lines) Account verification (accounts) Correspondence (letters) Northeast Office Midwest Office 100 hours 10,000 lines 1,000 accounts 50 letters 200 hours 7,000 lines 600 accounts 100 letters How much of the account verification costs will be assigned to the Northeast Office?

Pitt Jones Company had the following activities, allocated costs, and allocation bases: Activities Account inquiry (hours) Account billing (lines) Account verification (accounts) Correspondence (letters) Allocated Costs Allocation Base $60,000 $30,000 $15,000 $10,000 2,000 hours 20,000 lines 20,000 accounts 1,000 letters The above activities are carried out at two of their regional offices. Account inquiry (hours) Account billing (lines) Account verification (accounts) Correspondence (letters) Northeast Office Midwest Office 100 hours 10,000 lines 1,000 accounts 50 letters 200 hours 7,000 lines 600 accounts 100 letters How much of the account verification costs will be assigned to the Northeast Office?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 3DQ

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Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?
A manufacturing company has two service and two production departments. Human Resources and Machine Repair are the service departments. The production departments are Grinding and Polishing. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The human resources department services all departments of the company, and its costs are allocated using the numbers of employees within each department, while machine repair costs are allocable to Grinding and Polishing on the basis of machine hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.
Thayne Company has 30 clerks that work in its Accounts Payable Department. A study revealed the following activities and the relative time demanded by each activity: Required: Classify the four activities as value-added or non-value-added, and calculate the clerical cost of each activity. For non-value-added activities, indicate why they are non-value-added.
Joseph Fox, controller of Thorpe Company, has been in charge of a project to install an activity-based cost management system. This new system is designed to support the companys efforts to become more competitive. For the past six weeks, he and the project committee members have been identifying and defining activities, associating workers with activities, and assessing the time and resources consumed by individual activities. Now, he and the project committee are focusing on three additional implementation issues: (1) identifying activity drivers, (2) assessing value content, and (3) identifying cost drivers (root causes). Joseph has assigned a committee member the responsibilities of assessing the value content of five activities, choosing a suitable activity driver for each activity, and identifying the possible root causes of the activities. Following are the five activities with possible activity drivers: The committee member ran a regression analysis for each potential activity driver, using the method of least squares to estimate the variable and fixed cost components. In all five cases, costs were highly correlated with the potential drivers. Thus, all drivers appeared to be good candidates for assigning costs to products. The company plans to reward production managers for reducing product costs. Required: 1. What is the difference between an activity driver and a cost driver? In answering the question, describe the purpose of each type of driver. 2. For each activity, assess the value content and classify each activity as value-added or non-value-added (justify the classification). Identify some possible root causes of each activity, and describe how this knowledge can be used to improve activity performance. For purposes of discussion, assume that the value-added activities are not performed with perfect efficiency. 3. Describe the behavior that each activity driver will encourage, and evaluate the suitability of that behavior for the companys objective of becoming more competitive.
Golding Bank provided the following data about its resources and activities for its checking account process: Required: 1. Calculate the capacity cost rate for the checking account process. 2. Calculate the activity rates for the four activities. If the total number of statements issued was 20,000, calculate the cost of the issuing statements activity. 3. What if process improvements decreased the number of customer inquiries, leading to a 10 percent reduction in check processing hours and a 10,000 reduction in total resource costs? Update all the activity rates for these changes in operating conditions.
For the following situations identify whether the description is a centralized or decentralized organization. A. the United States Navy B. Farahs Dominos franchise store C. Dominos Pizza D. Middies Furniture, which is divided into separate operating units, such as living room, kitchen, flooring E. the local community college, which has a single payroll department, a single administrative headquarters, and a single human resources department since it flattened its organization structure F. Conner Corporation, which promotes managers from within the organization whenever possible and which has formal training programs for lower-level managers
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.)
BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows. Administration Accounting domestic International Employees – 21 36 43 Transactions 32,000 – 21,000 84,000 Department direct costs 360,000 140,000 $ 935,000 $ 3,730,000 Required: a. Allocate the cost of the service departments to the operating departments using the direct method.b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration.c. Allocate the cost of the service departments to the operating departments using the reciprocal method.
Potter & Weasley Company had the following activities, estimated indirect activity costs, and allocation bases: Activities Indirect Activity Costs Allocation Base Account inquiry (hours) $85,700 2600 Account billing (lines) $55,000 35,000 Account verification (accounts) $40,250 27,500 Correspondence (letters) $80,000 12,000 Potter & Weasley uses activity based costing.The above activities are used by Departments P and Q as follows: Department P Department Q Account inquiry (hours) 200 1000 Account billing (lines) 10,000 4,000 Account verification (accounts) 6,000 7,000 Correspondence (letters) 1,000 2,000 How much of the account inquiry cost will be assigned to Department Q? Question 15 options: $1318 $32,962 $6592 $13,000
Baldwin Enterprises has two service departments, Personnel and Legal, and two operating divisions, Eastern and Western. Personnel costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations follows: Personnel Legal Eastern Western Employees - 40 120 40 Hours 10,800 - 5,400 1,800 Department direct costs $ 300,000 $ 160,000 $ 1,200,000 $ 790,000 Required: Allocate the cost of the service departments to the operating divisions using the direct method. Allocate the cost of the service departments to the operating divisions using the step method. Start with Legal. Allocate the cost of the service departments to the operating divisions using the reciprocal method.
Middler Corporation, a manufacturer of electronics and communications systems, allocates Computing and Communications Services (CCS) service department costs to profit centers. The following table lists service categories and cost drivers used by the CCS department. The table also includes cost and cost drivers for each service for October. CCS ServiceCategory Cost Driver Budgeted Cost Budgeted CostDriver Quantity Help desk Number of calls $110,250 2,500 Network center Number of devices monitored 619,500 8,850 Electronic mail Number of user accounts 47,600 5,950 Handheld technology support Number of handheld devices issued 106,240 8,300 One of the profit centers for Middler Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector: The sector has 2,000 employees, of whom 40% are office employees. Almost all office employees (70%) have a computer on the network. 90 percent of the employees with a computer…
The Riverbed Brokerage firm is organized into two major sales divisions: institutional clients and retail clients. The firm also has two support departments: research and administration. The research department’s costs are allocated to the other departments based on a log of hours spent on tasks for each user. The administration department’s costs are allocated based on the number of employees in each department. Records are available for last period as follows: Support departments Operating departments Research Administration Institutional RetailPayroll costs $ 338,400 $ 289,700 $ 366,600 $ 585,200Other costs $ 231,370 $ 163,800 $ 112,830 $ 238,870Research hours 100 200 500 300Number of employees 7 10…