Question
Exercise 6-6 The Richetti Companys copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following
Exercise 6-6
The Richetti Companys copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity of 4,873,400 copies:
Salaries (fixed) | $91,200 | ||
Employee benefits (fixed) | 13,200 | ||
Depreciation of copy machines (fixed) | 9,800 | ||
Utilities (fixed) | 4,900 | ||
Paper (variable, 1 cent per copy) | 48,734 | ||
Toner (variable, 1 cent per copy) | 48,734 |
The costs are assigned to two cost pools, one for fixed and one for variable costs. The costs are then assigned to the sales department and the administrative department. Fixed costs are assigned on a lump-sum basis, 40 percent to sales and 60 percent to administration. The variable costs are assigned at a rate of 2 cents per copy. Assuming 4,673,400 copies were made during the year, 2,542,200 for sales and 2,131,200 for administration, calculate the copy department costs allocated to sales and administration.
Cost allocated to Sales $?
Cost allocated to administration $?
Exercise 6-9
OakRidge Metal Works received an offer from a big-box retail company to purchase 3,300 metal outdoor tables for $240 each. OakRidge Metal Works accountants determine that the following costs apply to the tables:
Direct material | $110 | |||
Direct labor | 50 | |||
Manufacturing overhead | 68 | |||
Total | $228 | |||
Of the $68 of overhead, $13 is variable and $55 relates to fixed costs. The $55 of fixed overhead is allocated as $1.10 per direct labor dollar. What will be the real effect on profit if the order is accepted?
Profit will (increase or decrease) and by how much $
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