Kay and Dee Manufacturing (K+D) has five business lines:

• Repair and Overhead (R+O): Repair of truck transmissions.

• Manufacturing: manufacturing of custom truck transmission parts

• Engineering: design of new parts and consulting services

• Chemical Treating: cleaning of old parts

• Material Handling: Handling and storage of direct materials

There are three support departments. Major activities of each department are:

• Human Resources (HR): Payroll, HR staff, employee services, Union/Management relations. Costs for this service department are allocated based on Headcount.

• Facility: buildings, building maintenance and related building costs. Costs for this service department are allocated based on area occupied.

• Main Office (HQ): salaries for the President, VP, and Finance department. Costs for this service department are allocated based on Direct Labour Hours.

Financial information is in Appendix A. Other information is in Appendix B.

Customers are charged based on the following:

• Repair and Overhead (R+O):

[Direct Labour R+O hours] x [R+O fully loaded Direct Labour hourly rate]

• Manufacturing:

[Direct Labour Manufacturing hours] x [Manufacturing fully loaded Direct Labour hourly rate]

• Engineering:

[Direct Labour Engineering hours] x [Engineering fully loaded Direct Labour hourly rate]

• Chemical Treating:

[Chemical Treating hours] x [Chemical Treating fully loaded hourly rate]

• Material Handling:

[value of direct materials handled] x [markup on direct materials]

• Direct Material Costs

• profit of 5% on direct materials and material handling costs, and 20% on all other costs

Note: fully loaded rate means the rate includes overheads

Information for Job#582 is as follows:

R+O Hours: 25 hours

Manufacturing hours: 15 hours

Engineering hours: 2 hours

Chemical Treating: 1 hour

Direct Materials: $4,200

REQUIRED:

1. Using the Direct Method, what is the cost of Job #582.

2. Using the Step-down method, what is the cost of Job #582. Assume that the step-down method is done in this order: 1st Building, 2nd HR, 3rd HQ

3. Using the Reciprocal Method, what is the cost of Job #582?

4. Briefly comment on the cost drivers for the support departments. (ie. Do you think they are appropriate, or can you recommend something better?)

51,936 88,585 1057 68 20 202 387,595 162 700 1670 2,153,074 134.142 2275 227 27,689 445 407 22 oso GL: 400 is Direct Material revised - June 21 (the original version incorrectly stated that GL 400 was Direct Labour) GL: 500 is Direct Labour revised - June 21 (the original version incorrectly stated that GL 500 was Direct Material) all other GL accounts are Overhead Material Chemical GL# Expense Name HQ HR Building Handling R+O Manufacturing Treating 400 Direct Materials Engineering TOTAL 3,790,924 22,065,478 4,613,872 30,470.274 500 Direct Labour costs 6,117,915 4.785,457 4,056,720 14,960,091 601 Indirect Labour - Plant 145,288 2,590,299 320,628 461,110 38,550 223.096 3,778.971 602 Indirect by Direct - Plant Hourly 482,234 220,217 103.214 400 780 129,758 935,422 603 Management Authorized Union Activity 31,853 314,607 2,012 1,409 73,301 164 123 423,304 we 604 Indirect by Direct - Tool Repairs 69 or 15,219 10.151 80,167 10 105,605 605 Indirect by Dir - Assist Maintenance 5 2 5 140 606 Indir X Dir - Assist Support Groups 9.502 8,600 9.686 884 4.016 44,315 57,814 607 Indir Dir - Meetings 2,589 3,232 13,947 19,450 608 Indir X Dir - Working Indirect 39.218 488 4,844 5,353 848 Indir Dir - HR Issues 28 1,779 815 138,312 42 610 Indirect by Direct - General 192,869 1 680 80,862 31,972 113,515 612 Indirect by Direct - Graphics Print 2,800 615 Ind. Labour-Hrly/Wkly/Biwkly Training 27,469 30,269 20 537 449 62.969 85,223 2,469 151,647 620 1X D-Continuous Improvement Time 702 622 Overtime Premium - Hourly 185,004 5,836 280,126 199,230 212,004 73.546 35,197 982 520,958 623 Vision Care 1,339 1,076 1,941 2,650 7.385 840 18,636 624 Orthodontic Care 268 42,109 402 169 8,398 11,575 650 102 1,340 22.803 650 Lite / A.D.D. Insurance 7,380 7.455 628 Nightshift Premium 118,162 102.959 1,201 411,175 41,614 17,478 59,366 110,672 15,874 245,003 629 Employment Insurance 26,879 7,821 206,846 86,875 132,004 104,690 4,208 113,308 682,630 630 Workmen's Compensation 27,332 7,535 319,647 134.252 119,154 178,750 w 631 Dental Coverage 2.184 27,702 816,555 112,112 13,313 217,154 91,205 186,742 145,827 632 Ontario Health Insurance Plan 1,518 85,153 444 794 853,024 111,734 14,572 692 Version 171,783 72,149 166,119 720,027 7.182 28 29 96,655 633 Vacation Pay 1,360,220 172103 36,868 25,450 172,123 72,292 461.173 268,305 4,165 24 17,312 634 Statuatory Holidays 226, 115 Sealth 417,057 363,607 1756 635 Health 16,598 364,461 412,742 22 120 057 138,957 2002210 77 754 3,607,135 637 Pension Plan - Union 77,751 8,326 286,856 1,120,480 638 Pension Plan - Non Union 846,463 6107 21040 244,010 1,040 477 007 11,629 639 Recreation Club 462 206 177,997 264 462,365 17,000 BOB 361 3,485 1,463 4,575 861 4,418 640 Salaries - Weekly / Biweekly 36,962 1,485,060 842 Define Cont. Plan-Empir 4 p.c. Base 138,666 387,071 378,954 182,056 67,050 az 2.490 705 46,470 2059 3,130,735 144,010 143 Define Cont. Plan-Emplr 50 pc. Matc 3,058 41,284 19,593 20,856 57,680 1,911 249,108 12,245 90,509 172,720 647 Absence/Lateness - Staff 222 649 Overtime Premium - Wkly / Biwkly 89.210 89,432 2,896 1540 12,008 1,540 647 13,170 897 650 Canada Pension Plan 43,472 12170 18,828 26.248 400.102 723,640 75 654 Safety Shoe Allowance 30,000 1,296,867 310 450 494 9,863 9,663 2,161 7,951 660 Welding Rods 736 783,798 261,087 661 Operating Supplies 1,062,949 295 247,783 855,900 662 Lubricants, Solvents & Coolants 154,019 41,134 1,380,431 74,469 61,277 1,602 137.347 8.242 40,185 16,878 116,956 10,615 1,756,132 521,282 776,497 25.223 4.800 20,307 7,571 2,803 12,316 86,949 11,024 1,175 17,328 22,743 41,237 17,320 85.231 48 40 663 Stationery & Printing 673 109,088 1,425 111,186 49 671 Tool Usage 136 12,316 341,340 260,088 613.880 50 674 Electrodes & Accessories 75 2.211 2,286 51 681 Light & Power 232,161 232,161 52 682 Water & Sewage 17,328 136,981 154,309 53 683 Heating - Natural Gas 154,019 62.010 216020 54 684 Fuel/Propane 122,286 122 280 122,286 55 685 Telephone(Long Dist. Excl. Equip) 38,124 5,565 1,602 890 24,568 1,516 15,632 87 808 56 691 Furniture & Equip.-Non Capital Aquis 87,896 44,483 3,400 57 693 Maint-Building/Heating/Vent/Grounds 47,883 195,105 1,109 196,214 58 694 Maintenance - Plant & Machinery 502,455 7,130 23,936 10,760 544,281 59 696 Maintenance - Company Vehicles 158,251 158,251 60 698 Janitorial Services 294,225 294,225 61 710 Travel & Entertainment 112,211 4,857 66.978 7.218 07:44 191,263 62 711 Travel (Meals-50pc) 31,854 6,426 353 38.633 63 712 Bank Charges 82,393 82,393 82 393 64 714 Education & Training 29,124 2,512 31,692 1,024 64,352 65 716 Membership Fees 22.019 5,148 4,120 18,260 49,548 66 720 Donations 2.796 2.796 67 721 Bank Int. Charges - Long & Short Ter 301,109 31 1,109 301,109 68 726 Operating Expense - Comp. Vehicles 10,760 160 69 729 Leased Facilities (425) (425) 70 732 Legal Fees 374.714 27.650 22,140 424 504 24,504 71 734 Audit Fees + Audit rees 85,231 72 736 Consultant Fees 311,692 60,350 8,683 75,000 24,950 1,130 481,805 73 740 Miscellaneous 209.836 11,368 31,759 24,298 600 8,601 235 500 74 742 Advertising 36 36 75 748 Computer Software - PC's 3,800 756 1,395 5,951 76 761 Insurance 201,951 201,951 77 762 Municipal Taxes 432,736 432,736 78 763 Depreciation 54.002 23,929 526,223 186,982 255,503 849,420 46,200 104.002 2,046,261 79 806 Miscellaneous Recoveries (2.733) (39,000) (1,006) (50) (42,788) 80 81 Total Costs for Responsibility Centre 4,901,398 777,199 9,198,554 5,606,073 16,179,253 33,923,386 845,325 10.312.961 81,744,150 82 83 10,920 287,196 Other information Summary Information Material Handling Chemical Treating HQ HR Building R+O Manufacturing Engineering Direct Labour (hours) 0 0 0 0 0 225.000 237,422 1402 106,250 Processing Time 0 0 0 0 0 0 1,820 0 Headcount (employees) 8 7 15 12 180 350 1 45 Floorspace (square feet) 3,005 2,200 19,600 6,250 540,000 360,000 28,483 11,000 51,936 88,585 1057 68 20 202 387,595 162 700 1670 2,153,074 134.142 2275 227 27,689 445 407 22 oso GL: 400 is Direct Material revised - June 21 (the original version incorrectly stated that GL 400 was Direct Labour) GL: 500 is Direct Labour revised - June 21 (the original version incorrectly stated that GL 500 was Direct Material) all other GL accounts are Overhead Material Chemical GL# Expense Name HQ HR Building Handling R+O Manufacturing Treating 400 Direct Materials Engineering TOTAL 3,790,924 22,065,478 4,613,872 30,470.274 500 Direct Labour costs 6,117,915 4.785,457 4,056,720 14,960,091 601 Indirect Labour - Plant 145,288 2,590,299 320,628 461,110 38,550 223.096 3,778.971 602 Indirect by Direct - Plant Hourly 482,234 220,217 103.214 400 780 129,758 935,422 603 Management Authorized Union Activity 31,853 314,607 2,012 1,409 73,301 164 123 423,304 we 604 Indirect by Direct - Tool Repairs 69 or 15,219 10.151 80,167 10 105,605 605 Indirect by Dir - Assist Maintenance 5 2 5 140 606 Indir X Dir - Assist Support Groups 9.502 8,600 9.686 884 4.016 44,315 57,814 607 Indir Dir - Meetings 2,589 3,232 13,947 19,450 608 Indir X Dir - Working Indirect 39.218 488 4,844 5,353 848 Indir Dir - HR Issues 28 1,779 815 138,312 42 610 Indirect by Direct - General 192,869 1 680 80,862 31,972 113,515 612 Indirect by Direct - Graphics Print 2,800 615 Ind. Labour-Hrly/Wkly/Biwkly Training 27,469 30,269 20 537 449 62.969 85,223 2,469 151,647 620 1X D-Continuous Improvement Time 702 622 Overtime Premium - Hourly 185,004 5,836 280,126 199,230 212,004 73.546 35,197 982 520,958 623 Vision Care 1,339 1,076 1,941 2,650 7.385 840 18,636 624 Orthodontic Care 268 42,109 402 169 8,398 11,575 650 102 1,340 22.803 650 Lite / A.D.D. Insurance 7,380 7.455 628 Nightshift Premium 118,162 102.959 1,201 411,175 41,614 17,478 59,366 110,672 15,874 245,003 629 Employment Insurance 26,879 7,821 206,846 86,875 132,004 104,690 4,208 113,308 682,630 630 Workmen's Compensation 27,332 7,535 319,647 134.252 119,154 178,750 w 631 Dental Coverage 2.184 27,702 816,555 112,112 13,313 217,154 91,205 186,742 145,827 632 Ontario Health Insurance Plan 1,518 85,153 444 794 853,024 111,734 14,572 692 Version 171,783 72,149 166,119 720,027 7.182 28 29 96,655 633 Vacation Pay 1,360,220 172103 36,868 25,450 172,123 72,292 461.173 268,305 4,165 24 17,312 634 Statuatory Holidays 226, 115 Sealth 417,057 363,607 1756 635 Health 16,598 364,461 412,742 22 120 057 138,957 2002210 77 754 3,607,135 637 Pension Plan - Union 77,751 8,326 286,856 1,120,480 638 Pension Plan - Non Union 846,463 6107 21040 244,010 1,040 477 007 11,629 639 Recreation Club 462 206 177,997 264 462,365 17,000 BOB 361 3,485 1,463 4,575 861 4,418 640 Salaries - Weekly / Biweekly 36,962 1,485,060 842 Define Cont. Plan-Empir 4 p.c. Base 138,666 387,071 378,954 182,056 67,050 az 2.490 705 46,470 2059 3,130,735 144,010 143 Define Cont. Plan-Emplr 50 pc. Matc 3,058 41,284 19,593 20,856 57,680 1,911 249,108 12,245 90,509 172,720 647 Absence/Lateness - Staff 222 649 Overtime Premium - Wkly / Biwkly 89.210 89,432 2,896 1540 12,008 1,540 647 13,170 897 650 Canada Pension Plan 43,472 12170 18,828 26.248 400.102 723,640 75 654 Safety Shoe Allowance 30,000 1,296,867 310 450 494 9,863 9,663 2,161 7,951 660 Welding Rods 736 783,798 261,087 661 Operating Supplies 1,062,949 295 247,783 855,900 662 Lubricants, Solvents & Coolants 154,019 41,134 1,380,431 74,469 61,277 1,602 137.347 8.242 40,185 16,878 116,956 10,615 1,756,132 521,282 776,497 25.223 4.800 20,307 7,571 2,803 12,316 86,949 11,024 1,175 17,328 22,743 41,237 17,320 85.231 48 40 663 Stationery & Printing 673 109,088 1,425 111,186 49 671 Tool Usage 136 12,316 341,340 260,088 613.880 50 674 Electrodes & Accessories 75 2.211 2,286 51 681 Light & Power 232,161 232,161 52 682 Water & Sewage 17,328 136,981 154,309 53 683 Heating - Natural Gas 154,019 62.010 216020 54 684 Fuel/Propane 122,286 122 280 122,286 55 685 Telephone(Long Dist. Excl. Equip) 38,124 5,565 1,602 890 24,568 1,516 15,632 87 808 56 691 Furniture & Equip.-Non Capital Aquis 87,896 44,483 3,400 57 693 Maint-Building/Heating/Vent/Grounds 47,883 195,105 1,109 196,214 58 694 Maintenance - Plant & Machinery 502,455 7,130 23,936 10,760 544,281 59 696 Maintenance - Company Vehicles 158,251 158,251 60 698 Janitorial Services 294,225 294,225 61 710 Travel & Entertainment 112,211 4,857 66.978 7.218 07:44 191,263 62 711 Travel (Meals-50pc) 31,854 6,426 353 38.633 63 712 Bank Charges 82,393 82,393 82 393 64 714 Education & Training 29,124 2,512 31,692 1,024 64,352 65 716 Membership Fees 22.019 5,148 4,120 18,260 49,548 66 720 Donations 2.796 2.796 67 721 Bank Int. Charges - Long & Short Ter 301,109 31 1,109 301,109 68 726 Operating Expense - Comp. Vehicles 10,760 160 69 729 Leased Facilities (425) (425) 70 732 Legal Fees 374.714 27.650 22,140 424 504 24,504 71 734 Audit Fees + Audit rees 85,231 72 736 Consultant Fees 311,692 60,350 8,683 75,000 24,950 1,130 481,805 73 740 Miscellaneous 209.836 11,368 31,759 24,298 600 8,601 235 500 74 742 Advertising 36 36 75 748 Computer Software - PC's 3,800 756 1,395 5,951 76 761 Insurance 201,951 201,951 77 762 Municipal Taxes 432,736 432,736 78 763 Depreciation 54.002 23,929 526,223 186,982 255,503 849,420 46,200 104.002 2,046,261 79 806 Miscellaneous Recoveries (2.733) (39,000) (1,006) (50) (42,788) 80 81 Total Costs for Responsibility Centre 4,901,398 777,199 9,198,554 5,606,073 16,179,253 33,923,386 845,325 10.312.961 81,744,150 82 83 10,920 287,196 Other information Summary Information Material Handling Chemical Treating HQ HR Building R+O Manufacturing Engineering Direct Labour (hours) 0 0 0 0 0 225.000 237,422 1402 106,250 Processing Time 0 0 0 0 0 0 1,820 0 Headcount (employees) 8 7 15 12 180 350 1 45 Floorspace (square feet) 3,005 2,200 19,600 6,250 540,000 360,000 28,483 11,000