LiquidGlue Inc. is a company that produces liquid glue. Hourly employees on the assembly line in the
Question:
LiquidGlue Inc. is a company that produces liquid glue. Hourly employees on the assembly line in the manufacture use machinery to pour the liquid glue into the bottles. Hourly employees on the assembly line then put a sticker on the bottle and place the bottles in boxes. Salaried supervisors in manufacture oversee the process. The company hires Fed-Mex to ship the boxes filled with bottles of liquid glue to local retailers such as Cool-Mart. LiquidGlue Inc. has a beautiful head office filled with salaried employees, such as accountants and lawyers. They outsource the marketing process to an external design company.
Categorize the following costs as either fixed or variable.
Explain whether they are direct, indirect, or overhead costs.
1. Empty plastic bottles 5. Salary of Accountants 9. Marketing costs
2. Machinery rental in the manufacture 6. Shipping costs 10. Liquid glue
3. Salaried employees in the head office 7. Electricity costs for the manufacture 11. Salary of Lawyers
4. Salaried supervisors in the manufacture 8. Rent for the head office 12. Salary of CEO
LiquidHair's demand for bottles of shampoo was 10,000 units. The CEO asked the accountant about the expected cost for the sales-order activity. A new software had been installed, and the CEO wanted to know how the software affects costs. The average sales order is for 20 units. The software requires a computer (1 min per order) and processing labour (5 min per order). The computer is leased at a cost of $1,000 per 4 hours. Salaries are $2,000 per hour.
What is the cost allocation:
Computer per order?
Computer per unit?
Labor per order?
Work by unit?