The company SMALL SHIPYARDS manufactures small-sized sailing ships following the orders of its customers. The production process
Question:
The company SMALL SHIPYARDS manufactures small-sized sailing ships following the orders of its customers. The production process is organized in two main and two auxiliary departments. The main departments are the Cutting department and the Assembling department and the auxiliary departments are the Repair department and the Warehouse department. The Repair department provides services to both the Warehouse department and the other two main departments.
The monthly budgeted operating cost of the Repair department is 23,100 euros and of the Warehouse department is 11,630 euros. Additional monthly budget data regarding costs and other operational characteristics regarding the company's production process are given in the following table.
Auxiliary Departments | Main departments | |||
Maintenance | Storage | Cutting | Assembly | |
Other general industrial expenses | 98,695 euros | 160,575 euros | ||
Direct Labour hours | 1,000 | 30000 | ||
Repair requests | 20 | 30 | 50 | |
Requests for receiving material | 700 | 300 |
The business uses departmental (Main and auxilliary departments) general industrial overhead rates based on direct labor hours.
It is requested to redistribute the costs of the auxiliaries to the main departments with the graduated method by choosing the most appropriate basis of apportionment for each cost element.
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young