FUNDAMENTALS OF COST ACCT.-CONNECT CARD
6th Edition
ISBN: 9781260852349
Author: LANEN
Publisher: MCG
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Textbook Question
Chapter 12, Problem 40E
Alternative Allocation Bases
Thompson Aeronautics repairs aircraft engines. The company’s Purchasing Department supports its two departments, Defense and Commercial. The Defense division has contracts with the Department of Defense and the Commercial division works primarily with domestic airlines and air freight companies. The cost of the Purchasing Department is $6 million annually.
Information on the activity of the Purchasing Department for the last year follows:
Required
- a. What is the cost charged to each division if Thompson allocates Purchasing Department costs based on the number of purchase orders?
- b. What is the cost charged to each division if Thompson allocates Purchasing Department costs based on the dollar amount of the purchases?
- c. Contracts with the Defense Department are on a cost-plus fixed fee basis, meaning the price is based on the cost of repairing an engine, including any overhead assigned to the division. Contracts with commercial airlines and air freight companies are almost all fixed price, meaning the price does not depend directly on the cost. Will this affect Thompson’s choice of an allocation base? Should it?
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Assigning Costs to Activities, Resource Drivers
The Receiving Department has three activities: unloading, counting goods, and inspecting. Unloading uses a forklift that is leased for $21,000 per year. The forklift is used only for unloading. The fuel for the forklift is $3,700 per year. Other operating costs (maintenance) for the forklift total $1,500 per year. Inspection uses some special testing equipment that has depreciation of $1,750 per year and an operating cost of $1,750. Receiving has three employees who have an average salary of $50,000 per year. The work distribution matrix for the receiving personnel is as follows:
Activity
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Unloading
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Counting
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No other resources are used for these activities.
Required:
1. Calculate the cost of each activity.
Unloading
$fill in the blank 1
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Inspecting
$fill in the blank 3
2. Explain the two methods used to assign costs to activities.…
Assigning Costs to Activities, Resource Drivers
The receiving department has three activities: unloading, counting goods, and inspecting. Unloading uses a forklift that is leased for $15,000 per year. The forklift is used only for unloading. The fuel for the forklift is $3,600 per year. Other operating costs (maintenance) for the forklift total $1,500 per year. Inspection uses some special testing equipment that has depreciation of $1,200 per year and an operating cost of $750. Receiving has three employees who have an average salary of $50,000 per year. The work distribution matrix for the receiving personnel is as follows:
Activity
Percentage of Time on Each Activity
Unloading
40%
Counting
25
Inspecting
35
No other resources are used for these activities.
Required:
1. Calculate the cost of each activity.
Unloading
$fill in the blank 1
Counting
$fill in the blank 2
Inspecting
$fill in the blank 3
2. Explain the two methods used to assign costs to activities.
Corazon Manufacturing Company has a purchasing department staffed by five purchasingagents. Each agent is paid $28,000 per year and is able to process 4,000 purchase orders. Lastyear, 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 availabilityb. unused capacity3. Calculate the dollar cost of:a. total activity availabilityb. unused capacity4. 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 pur-chase orders could be processed by four and a half purchasing agents? What would unused
capacity be in purchase orders?
Chapter 12 Solutions
FUNDAMENTALS OF COST ACCT.-CONNECT CARD
Ch. 12 - What does decentralization mean in the context of...Ch. 12 - Why is performance measurement an important...Ch. 12 - Prob. 3RQCh. 12 - What does dysfunctional decision making refer to?Ch. 12 - Prob. 5RQCh. 12 - What are the five basic kinds of decentralized...Ch. 12 - What is goal congruence? How is it different from...Ch. 12 - Prob. 8RQCh. 12 - What is relative performance evaluation?Ch. 12 - Prob. 10RQ
Ch. 12 - Prob. 11RQCh. 12 - Prob. 12RQCh. 12 - The management control system collects information...Ch. 12 - Salespeople are often paid a commission based on...Ch. 12 - Prob. 15CADQCh. 12 - Prob. 16CADQCh. 12 - On December 30, a manager determines that income...Ch. 12 - Prob. 18CADQCh. 12 - Prob. 19CADQCh. 12 - The manager of an operating department just...Ch. 12 - In the previous chapters, we considered different...Ch. 12 - A company has a bonus plan that states that...Ch. 12 - Prob. 23CADQCh. 12 - Prob. 24CADQCh. 12 - Prob. 25CADQCh. 12 - Prob. 26CADQCh. 12 - Prob. 27CADQCh. 12 - Prob. 28CADQCh. 12 - Prob. 29ECh. 12 - Evaluating Management Control SystemsEthical...Ch. 12 - Prob. 31ECh. 12 - Management Control Systems and Incentives A...Ch. 12 - Prob. 33ECh. 12 - Prob. 34ECh. 12 - Prob. 35ECh. 12 - Alternative Allocation Bases: Service Bartolo...Ch. 12 - Prob. 37ECh. 12 - Single versus Dual Rates: Ethical Considerations A...Ch. 12 - Single versus Dual Rates
Using the data for the...Ch. 12 - Alternative Allocation Bases Thompson Aeronautics...Ch. 12 - Tone at the Top, Ethics Once upon a time, a major...Ch. 12 - Prob. 42ECh. 12 - Prob. 43ECh. 12 - Internal Controls Commonly in many organizations,...Ch. 12 - Evaluating Management Control Systems SPG Company...Ch. 12 - Analyze Performance Report for Decentralized...Ch. 12 - Divisional Performance Measurement: Behavioral...Ch. 12 - Prob. 48PCh. 12 - Prob. 49PCh. 12 - Cost Allocations: Comparison of Dual and Single...Ch. 12 - Cost Allocation for Travel Reimbursement Your...Ch. 12 - Incentives, Illegal Activities, and Ethics An...
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