1.
Cost allocation is a process of assigning or allocating indirect costs to every unit using a predetermined overhead rate. The predetermined overhead rate is determined by dividing the estimated total cost by the estimated activity base.
:
The allocation of fixed administrative expenses among the three restaurants for this year.
2.
There are two types of changes which are positive changes and negative changes. A positive change will reflect an increase in the cost allocated to the respective restaurant whereas a negative change reflects a decrease in fixed cost allocated to the department.
:
The change in each restaurant’s allocated costs from last year to this year.
3.
A cost allocation base is referred to the factors or basis upon which an organization allocates its overhead costs. The major cost allocation base can be direct labor used, direct material used, machine hours used, an area used by each department, sales, profit earned, and so on.
To discuss:
The usefulness of sales dollars as an allocation base.
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MANAGERIAL ACCOUNTING (LL) W/CONNECT >C<
- Service EmphasisThe following analysis of selected data is for each of the two services Gates Corporation provides. Service A Service B Per-service data at 10,000 services Sales price $28 $24 Service costs: Variable 11 11 Fixed 6 4 Selling and administrative expenses: Variable 5 3 Fixed 3 1 In the Gates operation, labor capacity is the company's constraining resource. Each unit of A requires 3 hours of labor, and each unit of B requires 2 hours of labor. Assuming that all services can be sold at a normal price, prepare an analysis showing which of the two services should be provided with any unused productive capacity that Gates might have. Service A B Revenue Answer Answer Less: Variable cost Answer Answer Contribution margin Answer Answer Labor hours per unit Answer Answer Contribution margin per labor hour Answer Answer Any unused capacity should be devoted…arrow_forward! lapter Seven Required information [The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $75 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 46,000 units and sold 42,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Saved Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense $25 $ 20 $2 $4 Net operating income Net operating loss $ 644,000 $ 388,000 The company sold 31,000 units in the East region and 11,000 units in the West region. It determined that $200,000 of its fixed selling and administrative expense is traceable to the West region, $150,000 is traceable to the East region, and the remaining $38,000 is a common fixed expense. The company will continue to incur…arrow_forwardDepartmental Cost Allocation Robinson Products Company has two service departments (S1 and S2) and two production departments (P1 and P2). The distribution of each service depart- ment's efforts (in percentages) to the other departments is: To From S1 S2 P1 P2 S1 10% 20% ?% S2 10% 30 The direct operating costs of the departments (including both variable and fixed costs) are: S1 $180,000 S2 60,000 P1 50,000 P2 120,000 Required 1. Determine the total cost of P1 and P2 using the direct method. 2. Determine the total cost of P1 and P2 using the step method. 3. Determine the total cost of P1 and P2 using the reciprocal method.arrow_forward
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- Question 8 -/1 S View Policies ons Current Attempt in Progress Support Morales Corporation produces microwave ovens. The following per unit cost information is available: direct materials $34, direct labor $29, variable manufacturing overhead $15, fixed manufacturing overhead $42, variable selling and administrative expenses $17, and fixed selling and administrative expenses $26. Its desired ROI per unit is $29. Compute the markup percentage using absorption- cost pricing. (Round answer to 2 decimal places, eg al 10.50%.) Markup percentage 8:44 PM ) 11/18/2019 hp ho l ins 12 home end delete pg up prt sc 44 ++ backspace lock 7 P Dome CO 96arrow_forwardAssignment 2.1 ABC Itd. Manufactures and sells four types of products under the band names of A, B, C and D. the sales mix in value comprises 33 %, 41 2 %, 162% and 8 % of A, 3 3 3 B, C and D respectively. The total budgeted sales (100%) are birr 60,000 per month. Operating costs are as follows: Variable cost: A 60% of selling price B 68% of selling price C 50% of selling price D 40% of selling price The fixed cost is birr 14,700 per month Required Compute the breakeven point for the products on an overall basisarrow_forwardQuestion 10.4 Big Machines Corp. has two divisions. Division Y manufactures components that can be sold in the external market place or transferred to Division Z for further processing. The following data relate to Division Y's component product. Variable manufacturing costs/unit $925 Fixed costs/unit at capacity $275 Selling price/unit $1,800 The capacity of the plant is 2,500 units per year. Division Z has offered to purchase 350 units from Division Y at a price of $1,600/unit, which is the market price of the component. The manager of Division Y has refused this offer stating that it would only return a rate of 25.00%, when the divisional target return on sales is 28.00%. The Division Y manager also states that additional fixed costs of $195,000 would be required to produce the 350 units. The corporate required rate of return is 18% of assets and the existing asset base in Division Y is $2,500,000. Required: How many units must Division Y sell in order…arrow_forward
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