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.

Douglas Davis, controller for Marston, Inc., prepared the following budget for manufacturing costs at two different levels of activity for 20X1: During 20X1, Marston worked a total of 80,000 direct labor hours, used 250,000 machine hours, made 32,000 moves, and performed 120 batch inspections. The following actual costs were incurred: Marston applies overhead using rates based on direct labor hours, machine hours, number of moves, and number of batches. The second level of activity (the right column in the preceding table) is the practical level of activity (the available activity for resources acquired in advance of usage) and is used to compute predetermined overhead pool rates. Required: 1. Prepare a performance report for Marstons manufacturing costs in the current year. 2. Assume that one of the products produced by Marston is budgeted to use 10,000 direct labor hours, 15,000 machine hours, and 500 moves and will be produced in five batches. A total of 10,000 units will be produced during the year. Calculate the budgeted unit manufacturing cost. 3. One of Marstons managers said the following: Budgeting at the activity level makes a lot of sense. It really helps us manage costs better. But the previous budget really needs to provide more detailed information. For example, I know that the moving materials activity involves the use of forklifts and operators, and this information is lost when only the total cost of the activity for various levels of output is reported. We have four forklifts, each capable of providing 10,000 moves per year. We lease these forklifts for five years, at 10,000 per year. Furthermore, for our two shifts, we need up to eight operators if we run all four forklifts. Each operator is paid a salary of 30,000 per year. Also, I know that fuel costs about 0.25 per move. Assuming that these are the only three items, expand the detail of the flexible budget for moving materials to reveal the cost of these three resource items for 20,000 moves and 40,000 moves, respectively. Based on these comments, explain how this additional information can help Marston better manage its costs. (Especially consider how activity-based budgeting may provide useful information for non-value-added activities.)

Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs for the past 10 months. Nizam Sanjay, a member of the controllers department, believes that overhead activities and costs should be classified into groups that have the same driver. He has decided that unloading incoming goods, counting goods, and inspecting goods can be grouped together as a more general receiving activity, since these three activities are all driven by the number of receiving orders. The 10 months of data shown below have been gathered for the receiving activity. Required: 1. Prepare a scattergraph, plotting the receiving costs against the number of purchase orders. Use the vertical axis for costs and the horizontal axis for orders. 2. Select two points that make the best fit, and compute a cost formula for receiving costs. 3. Using the high-low method, prepare a cost formula for the receiving activity. 4. Using the method of least squares, prepare a cost formula for the receiving activity. What is the coefficient of determination?

A manufacturing company has two service and two production departments. Building Maintenance and Factory Office are the service departments. The production departments are Assembly and Machining. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The building maintenance department services all departments of the company, and its costs are allocated using floor space occupied, while factory office costs are allocable to Assembly and Machining on the basis of direct labor 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.

Refer to the data in Exercise 7.18. When the capacity of the HR Department was originally established, the normal usage expected for each department was 20,000 direct labor hours. This usage is also the amount of activity planned for the two departments in Year 1 and Year 2. Required: 1. Allocate the costs of the HR Department using the direct method and assuming that the purpose is product costing. 2. Allocate the costs of the HR Department using the direct method and assuming that the purpose is to evaluate performance.

Chirko ​& Partners, a​ Quebec-based public accounting​ partnership, specializes in audit services. Its​ job-costing system has a single​ direct-cost category​ (professional labor) and a single​ indirect-cost pool​ (audit support, which contains all costs of the Audit Support​ Department). Audit support costs are allocated to individual jobs using actual professional​ labor-hours. Chirko & Partners employs 10 professionals to perform audit services. Budgeted and actual amounts for 2017 are as​ follows: Budget for 2017     Professional labor compensation $975,000   Audit support department costs $675,000   Professional labor-hours billed to clients 15,000 hours   Actual results for 2017     Audit support department costs $775,000   Professional labor-hours billed to clients 15,500 hours   Actual professional labor cost rate $54 per hour   1. Compute the​ direct-cost rate and the​ indirect-cost rate per professional​ labor-hour for 2017…

​& Partners, a​ Quebec-based public accounting​ partnership, specializes in audit services. Its​ job-costing system has a single​ direct-cost category​ (professional labor) and a single​ indirect-cost pool​ (audit support, which contains all costs of the Audit Support​ Department). Audit support costs are allocated to individual jobs using actual professional​ labor-hours. Chirko ​& Partners employs 10 professionals to perform audit services. Budgeted and actual amounts for 2017 are as​ follows: Chirko & Partners Budget for 2017     Professional labor compensation $975,000   Audit support department costs $675,000   Professional labor-hours billed to clients 15,000 hours       Actual results for 2017     Audit support department costs $775,000   Professional labor-hours billed to clients 15,500 hours Actual professional labor cost rate $54 per hour   Compute the​ direct-cost rate and the​ indirect-cost rate per professional​ labor-hour for 2017 under each method.…

Sasha Company allocates the estimated $192,400 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows: Department                                  Employees Accounting                                           4 Production                                            37 Sales                                                      16 How much of the accounting department costs will be allocated to the production?