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 depreciation.
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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Managerial Accounting
- Service Department Charges Korvanis Corporation operates a Medical Services Department for its employees. Charges to the company’s operating departments for the variable costs of the Medical Services Department are based on the actual number of employees in each department. Charges for the fixed costs of the Medical Services Department are based on the long-run average number of employees in each operating department. Variable Medical Services Department costs are budgeted at $80 per employee. Fixed Medical Services Department costs are budgeted at $400,000 per year. Actual Medical Services Department costs for the most recent year were $41,000 for variable costs and $408,000 for fixed costs. Data concerning employees in the three operating departments follow: Required: 1. Determine the Medical Services Department charges for the year to each of the operating departments—Cutting, Milling, and Assembly. 2. How much, if any, of the actual Medical Services Department costs for the year…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_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_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_forward
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