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163.      Big Valley Company produces two products. Big Valley Company used labor cost as a cost driver for support cost. Direct labor cost is estimated at $20 per hour. Products A and B require 5 and 9 hours of direct labor, respectively. Support cost is twice the direct labor cost. Big Valley Company recently installed a computer integrated manufacturing system. Because of this change, Big Valley Company’s accountants believe that the number of components is a better cost driver for support costs. Cost per component is estimated at $80 per component, Products A and B use 3 and 4 components, respectively. Compute the following:

a.     the support cost allocated to Product A, if direct labor cost is used as the cost driver
b.     the support cost allocated to Product B, if direct labor cost is used as the cost driver
c.      the support cost allocated to Product A, if number of components is the cost driver
     d.      the support cost allocated to Product B, if number of components is the cost driver

     
164.     Shakey Company, a producer of fine quality cuckoo clocks, produced 4,500 cuckoo clocks at a cost of $1,150,000 in November. In December the company produced 3,000 cuckoo clocks at a cost of $925,000.

     Required:

     a:     Using these two data points, determine a cost function for Shakey Company.
     b.     Determine the expected cost if Shakey Company produces 3,500 units.

     
165.     Given the following four cost behaviors and expected levels of cost-driver activity, predict total costs.

     a.     Fuel costs of driving vehicles, $0.37 per mile, driven 20,000 mile per month
     b.     Computer rental cost, $500 per piece of equipment per month for three computers for four months
     c.     Crew supervisors' costs, where a new supervisor is hired for each 10 workers employed; the supervisors are paid $50,000 per year and there were 82 workers employed.
     d.     Purchasing department cost for 4,000 orders in one month. Its cost function is $8,000 per month plus $7 per material order processed.


166.     The cost of the maintenance department at Wildwood Manufacturing has always been charged to the production departments based upon number of employees.      Recently, an activity analysis of possible cost drivers was performed which indicated that the square feet of space may also be a predictor of costs to be assigned to each department. Given the following data, prepare a report that contrasts the different amounts of maintenance department cost that would be allocated to each of the production departments if the cost driver used is (a) number of employees, and (b) the square feet of space.

                Dept. A     Dept. B     Dept. C
          Number of employees      300     250     50
          Square feet of space       15,000       25,000     10,000
          
          Total production department cost: $ 1,000,000


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