1.
Concept Introduction:
Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.
Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and
The cafeteria cost charges to the Auto division, and Truck division.
2.
Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.
The total cost allocated to each division if the cafeteria cost is allocated based on the number of meals served.
3.
Cost allocation: Cost allocation is a process of assigning or allocating costs to each and every unit or division using a predetermined rate. It helps to determine which division or unit of a company is responsible for which costs.
The criticism of the allocation method used in Part (2).
4.
Fixed costs: Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.
The strategy taken by managers of operating departments to estimate peak-period requirement and the steps should be taken by the top management to neutralize such strategies.
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Chapter 11 Solutions
MANAGERIAL ACCOUNTING CONNECT ACCESS
- nces Sharp Motor Company has two operating divisions-an Auto Division and a Truck Division. The company has a cafeteria that serves the employees of both divisions. The costs of operating the cafeteria are budgeted at $78,000 per month plus $0.80 per meal served. The company pays all the cost of the meals. The fixed costs of the cafeteria are determined by peak-period requirements. The Auto Division is responsible for 57% of the peak- period requirements, and the Truck Division is responsible for the other 43%. For June, the Auto Division estimated it would need 94,000 meals served, and the Truck Division estimated it would need 64,000 meals served. However, due to unexpected layoffs of employees during the month, only 64,000 meals were served to the Auto Division. Another 64,000 meals were served to the Truck Division as planned. The cafeteria's actual fixed costs for June totaled $82,000 and its actual meal costs totaled $114,400. Required: 1. How much cafeteria cost should be…arrow_forwardAlard Manufacturing Company has a billing department staffed by four billing clerks. Each clerk is paid 32,000 per year and is able to process 8,000 bills. Last year, 27,360 bills were processed by the four agents. Calculate the unused capacity in terms of number of bills. a. 27,360 b. 4,640 c. 8,000 d. 32,000arrow_forwardThe expected costs for the Maintenance Department of Stazler, Inc., for the coming year include: Fixed costs (salaries, tools): 64,900 per year Variable costs (supplies): 1.35 per maintenance hour Estimated usage by: Actual usage by: Required: 1. Calculate a single charging rate for the Maintenance Department. 2. Use this rate to assign the costs of the Maintenance Department to the user departments based on actual usage. Calculate the total amount charged for maintenance for the year. 3. What if the Assembly Department used 4,000 maintenance hours in the year? How much would have been charged out to the three departments?arrow_forward
- Multiple production department factory overhead rates The total factory overhead for Bardot Marine Company is budgeted for the year at 600,000 divided into two departments: Fabrication, 420,000, and Assembly, 180,000. Bardot Marine manufactures two types of boats: speedboats and bass boats. The speedboats require 8 direct labor hours in Fabrication and 4 direct labor hours in Assembly. The bass boats require 4 direct labor hours in Fabrication and 8 direct labor hours in Assembly. Each product is budgeted for 250 units of production for the year. Determine (A) the total number of budgeted direct labor hours for the year in each department, (B) the departmental factory overhead rates for both departments, and (C) the factory overhead allocated per unit for each product using the department factory overhead allocation rates.arrow_forwardplease answer question 1,2 and 3 An electrical component manufacturer budgets to sell 35,000 units although the factory has the capacity to produce 40,000 units under normal circumstances. Direct costs per unit are as follows: Wages $2.00 Materials $8.00 Overheads $4.00 Fixed costs for the period are expected to be $200,000. The selling price is $22 per unit. You are going to: Calculate how many units must be made and sold in order to breakeven during the period and then express the information on a CVP chart. 2. Ascertain the budgeted profit for the period, if 35,000 units are sold. 3. State the number of units to be manufactured when the amount of capital invested in this production is $640,000 and the directors require a 20% return on capital employed.arrow_forwardQUESTION 8 Avery Company has compiled the following data for the upcoming year: Sales are expected to be 13300 units at $31 each. • Each unit requires 2.1 pounds of direct materials at $2.1 per pound. • Each unit requires 0.7 hours of direct labor at $14 per hour. Manufacturing overhead is $6 per unit. Selling and administrative costs are $6 per unit What is Avery's budgeted cost of goods sold? M Azarrow_forward
- 15 MetalSheet Corporation is organized into two operating divisions (Fabrication and Finishing). The Maintenance Department provides services to both the Fabrication Division and the Finishing Division. The Maintenance Department's variable costs are budgeted at $31 per machine hour, with fixed costs budgeted at $287,000 for the year. Fabrication Division Finishing Division Multiple Choice At the end of the year, the actual variable costs of the Maintenance Department were $215,963 and fixed costs were $272,980. The Fabrication Division recorded a total of 1,830 machine hours for the year and the Finishing Division recorded a total of 4,940 machine hours. As MetalSheet Corporation is evaluating performance at the end of the year, how much of the Maintenance Department cost should be charged to the Finishing Division? $382,172 $354,040 $373,121 Percentage of Peak Period Capacity Required 30% 70% $362,698 Hours Planned 1,800 4,980arrow_forwardion 1 enny's direct material cost is $5 per unit. The direct labor rate is $19 per hour and each units takes 2 hours to produce. Variable manufacturing overhead is $5 per unit and total budgeted fixed overhead is $6000. A sales commission of $3 is paid on each unit. If Penny expects to produce 3900 units and sell 1400 units, what is The budget cost of goods sold per unit? Round your answer to the nearest 2 decimal places 200-2 Question 1 of 5arrow_forwardKnowledge Check 03 William Corporation has a contract with the labor union which guarantees its workers pay for at least 40,000 hours every quarter. Based on its direct labor budget for the current year, the company estimated It will need 39,000 direct labor-hours during the fourth quarter to produce 13.000 units of finished goods. Each unit requires 3 direct labor-hours (DLHs) and the cost of direct labor per hour is $12 per hour. What is the total direct labor cost for the fourth quarter? O $432,000 O $468,000 O $480,000 O $540,000arrow_forward
- XYZ Co. makes and sells product AB. The company provides the following data about its selling and administrative expenses budget: Monthly Fixed Cost Variable cost per unit sold Sales Commissions P0.75 Shipping P1.30 Advertising P30,000 P0.20 Executive salaries P25,000 Depreciation P15,000 Other expenses P7,000 All expenses except depreciation of office equipment are paid in cash in the month they are incurred. The company has budgeted to sell 18,000 units of product AB in August 2021. Questions: 1. How much is the total budgeted selling and administrative expenses for August 2021? 2. Assuming the cash disbursements for selling and administrative expenses total P116,000, then how many units of product AB does the company plan to sell?arrow_forwardService Department Charges Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company’s mine to its two steel mills—the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $350,000 per year, consisting of $0.25 per ton variable cost and $300,000 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 70% of the Transport Services Department’s capacity and the Southern Plant requires 30%. During the year, the Transport Services Department actually hauled the following amounts of ore for the two plants: Northern Plant, 130,000 tons; Southern Plant, 50,000 tons. The Transport Services Department incurred $364,000 in cost during the year, of which $54,000 was variable cost and $310,000 was fixed cost. Required: 1. How much of the $54,000 in variable cost should be charged to each plant. 2. How much of the $310,000 in…arrow_forward5 Demco Berhad produces a single product and used flexible budgetary control system as part of company's planning. The company assigns the manufacturing overhead costs to production on the basis of machine hours. Below is part of the budgeted overhead cost based on machine hours: Capacity 80% 100% Machine hours Maintenance Supplies 40,000 50,000 RM34,000 RM46,000 RM28,000 RM30,000 During April 2020, the company operated at 85% of machine hours and the actual overhead cost for maintenance and supplies are RM38,750 and RM26,375 respectively. The maintenance cost is a semi variable where there is a step up cost of RM5,000 in the fixed cost element for volumes in excess of 40,000 machine hours. The actual fixed costs remains as budgeted. Calculate the variable cost per machine hour for maintenance cost above. A. RMO.20 per machine hour B. RM0.60 per machine hour C. RMO.70 per machine hour D. RM1.20 per machine hourarrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
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