Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 17, Problem 28P
Travelcraft Company manufactures a complete line of fiberglass suitcases and attaché cases. The firm has three manufacturing departments: Molding, Component, and Assembly. There are also two service departments: Power and Maintenance.
The sides of the cases are manufactured in the Molding Department. The frames, hinges, and locks are manufactured in the Component Department. The cases are completed in the Assembly Department. Varying amounts of materials, time, and effort are required for each of the cases. The Power Department and Maintenance Department provide services to the three manufacturing departments.
Travelcraft has always used a plantwide
Karen Mason, director of cost management, has recommended that Travelcraft use departmental overhead rates. The planned operating costs and expected levels of activity for the coming year have been developed by Mason and are presented by department in the following schedules. (All numbers are in thousands.)
Required:
- 1. Calculate the plantwide overhead rate for Travelcraft Company for the coming year using the same method as used in the past.
- 2. Karen Mason has been asked to develop departmental overhead rates for comparison with the plantwide rate. The following steps are to be followed in developing the departmental rates.
- a. The Maintenance Department costs should be allocated to the three manufacturing departments using the direct method.
- b. The Power Department costs should be allocated to the three manufacturing departments using dual cost allocation combined with the direct method of service department cost allocation. Fixed costs are to be allocated according to maximum allotted capacity, and variable costs are to be allocated according to planned usage for the coming year.
- c. Calculate departmental overhead rates for the three manufacturing departments using a machine-hour cost driver for the Molding Department and a direct-labor-hour cost driver for the Component and Assembly departments.
- 3. As Karen Mason’s assistant, draft a memo for her to send to Travelcraft’s president recommending whether the company should use a plantwide rate or departmental rates to assign overhead to products.
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Chapter 17 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Should actual or budgeted service department costs...Ch. 17 - Prob. 4RQCh. 17 - Why does dual cost allocation improve the...Ch. 17 - What potential behavioral problem can result when...Ch. 17 - Should actual or budgeted service department costs...Ch. 17 - Explain the difference between two-stage...Ch. 17 - Define the following terms: joint production...Ch. 17 - Prob. 10RQ
Ch. 17 - Describe the relative-sales-value method of joint...Ch. 17 - Define the term net realizable value, and explain...Ch. 17 - Are joint cost allocations useful? If they are,...Ch. 17 - For what purpose should the managerial accountant...Ch. 17 - Prob. 15ECh. 17 - Refer to the data given in the preceding exercise....Ch. 17 - Tuscaloosa National Bank has two service...Ch. 17 - Refer to the data given in the preceding exercise....Ch. 17 - Breakfasttime Cereal Company manufactures two...Ch. 17 - Refer to the data given in the preceding exercise....Ch. 17 - Refer to the data given in Exercise 1720....Ch. 17 - Prob. 23ECh. 17 - Prob. 24PCh. 17 - Prob. 25PCh. 17 - Celestial Artistry Company is developing...Ch. 17 - Snake River Sawmill manufactures two lumber...Ch. 17 - Travelcraft Company manufactures a complete line...Ch. 17 - Biondi Industries is a manufacturer of chemicals...Ch. 17 - Berger Company manufactures products Delta, Kappa,...Ch. 17 - Prob. 31PCh. 17 - Lafayette Company manufactures two products out of...Ch. 17 - Refer to the data given in Problem 1726 for...Ch. 17 - Prob. 34PCh. 17 - Top Quality Fruit Company, based on Oahu, grows,...Ch. 17 - Prob. 36C
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