1. Allocate the costs of the service departments using the step-down method.
2. Using the results of number 1, compute the cost per direct-labourhour in the Mechanical Instruments department and the cost per component in the Electronic Instruments department.
3. Using the results of number 2, compute the cost per unit of product for instruments M1, M2, E1, and E2.

Refer to the data in Fundamental Review Problem 5-A3. 

Wheelick Controls Company has two producing departments, Mechanical Instruments and Electronic Instruments. In addition, there are two service departments, Building Services and Materials Receiving and Handling. The company purchases a variety of component parts from which the departments assemble instruments for sale in domestic and international markets.

The Electronic Instruments division is highly automated. The manufacturing costs depend primarily on the number of subcomponents in each instrument. In contrast, the Mechanical Instruments division relies primarily on a large labour force to hand-assemble instruments. Its costs depend on direct-labour-hours.

The costs of Building Services depend primarily on the square metres occupied. The costs of Materials Receiving and Handling depend primarily on the total number of components handled. Instruments M1 and M2 are produced in the Mechanical Instruments department, and E1 and E2 are produced in the Electronic Instruments department. Data for these products follow:

Budget figures for 2012 include:

Transcribed Image Text:

Direct Materials Number of Direct-Labour- Cost Components Hours M1 $74 25 4.0 M2 86 21 8.0 E1 63 10 1.5 E2 91 15 1.0 Materials Building Receiving Mechanical Electronic Service and Instruments Instruments