13 Allocating to smooth cost over varying levels of production LO 12-3

Production workers for Kennedy Manufacturing Company provided 320 hours of labor in January and 660 hours in February. Kennedy expects to use 4,000 hours of labor during the year. The rental fee for the manufacturing facility is $12,000 per month.

Required

Based on this information, how much of the rental cost should be allocated to the products made in January and to those made in February?

MONTH ALLOCATED COST

JANUARY _________________

FEBRUARY _________________

10 Pooling overhead cost LO 12-2

Eaton Manufacturing Company produced 2,900 units of inventory in January 2014. It expects to produce an additional 9,900 units during the remaining 11 months of the year. In other words, total production for 2014 is estimated to be 12,800 units. Direct materials and direct labor costs are $73 and $54 per unit, respectively. Eaton Company expects to incur the following manufacturing overhead costs during the 2014 accounting period.

Production supplies	$	6,000
Supervisor salary		180,000
Depreciation on equipment		129,000
Utilities		24,000
Rental fee on manufacturing facilities		333,000

Required

a.

Combine the individual overhead costs into a cost pool and calculate a predetermined overhead rate assuming the cost driver is number of units. (Round your answer to 2 decimal places.) PREDETERMINED OVERHEAD RATE ( ) PER UNIT 9 Allocating costs between divisions LO 12-2 Kaplan Services Company (KSC) has 62 employees, 23 of whom are assigned to Division A and 39 to Division B. KSC incurred $373,860 of fringe benefits cost during 2014. Required

Determine the amount of the fringe benefits cost to be allocated to Division A and to Division B.

DIVISION ALLOCATED COST

A __________________

B __________________

Desired profit LO 11-5

Lindo Company incurs annual fixed costs of $80,000. Variable costs for Lindos product are $40 per unit, and the sales price is $64 per unit. Lindo desires to earn an annual profit of $40,000.

Required

Determine the sales volume in dollars and units required to earn the desired profit. (Do not round intermediate calculations.)

SALES IN DOLLARS ( )

SALES IN UNITS ( )

4 Fixed versus variable cost behavior LO 11-1, 11-2

Moore Entertainment sells souvenir T-shirts at each rock concert that it sponsors. The shirts cost $8 each. Any excess shirts can be returned to the manufacturer for a full refund of the purchase price. The sales price is $20 per shirt.

Required

a.	What are the total cost of shirts and cost per shirt if sales amount to 7,000, 7,500, 8,000, 8,500, or 9,000?

NUMBER OF T-SHIRTS SOLD 7,000 7,500 8,000 8,500 9,000

TOTAL COST OF SHIRTS _______ ________ ___________ ___________ ____________

COSTS PER SHIRT _______ ________ ___________ ____________ ____________

b.

Is the cost of T-shirts a fixed or a variable cost? FIXED COST ( ) OR VARIABLE COST ( )

3 Fixed versus variable cost behavior LO 11-1, 11-2

Moore Entertainment sponsors rock concerts. The company is considering a contract to hire a band at a cost of $90,000 per concert.

Required

a.	What are the total band cost and the cost per person if concert attendance is 8,000, 8,500, 9,000, 9,500, or 10,000? (Round Cost per person answers to 2 decimal places.)

CONCERT ATTENDANCE 8,000 8,500 9,000 9,500 10,000

TOTAL COST OF CONCERT ________ _________ _________ ________ __________

COST PER PERSON _________ _________ _________ ________ ___________

b.	Is the cost of hiring the band a fixed or a variable cost? FIXED COST ( ) OR VARIABLE COST ( )