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 raw materials used in other business lines They also have 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 costs. Financial information is in Appendix A. Other information is in Appendix B. Customer are charged for Direct Labour, Direct Materials, applicable overhead and profit. Direct Labour costs are based on the average labour rate for each applicable category. Chemical Treatment costs are based on the average rate per hour. Overhead rates are based on the following allocation bases: Material Handling: value of materials handled Repair and Overhead (R+O): R+O Direct Labour costs Manufacturing: Manufacturing Direct Labour costs Engineering: Engineering Direct Labour costs Chemical Treating: Processing Hours K+D charges profit of 20% on labour and overhead costs, and 5% on direct material costs (for simplicity purposes, profit is not charged on Material Handling overhead). REQUIRED: 1. Briefly comment on the cost drivers for the support departments. (ie. Do you think they are appropriate, or can you come up with something else). 2. Using a Single Rate (ie. All overheads are in a single cost pool and the cost pool is allocated on the basis of total direct labour costs), what is the per centage markup that is applied to each direct labour dollar? 3. What are the rates for each business line based on the Direct Method? 4. Step-down method: A. What are the rates for each business line based on the Step-down method? B. Explain your reasoning for which order was chosen. 5. What are the rates for each business line based on the Reciprocal Method? 6. Based on the Direct Method, how much should be charged to a customer to repair a transmission that involves the following: R+O Hours: Manufacturing hours: Engineering hours: Chemical Treating: Direct Materials: 25 hours 15 hours 2 hours 1 hour $4,200 FINANCIAL INFORMATION NOTE: Direct Materials = GL 400 Direct Labour = GL 500 Overheads all other GL accounts Deparments 10 11 12 31 32 33 21 Material Handling 41 Chemical Treating HO HR Building Engineering 4.613,872 4.056.720 65 231 223,096 145 288 31 853 123 RO 3.790,924 6.117.915 461,110 103 214 1.409 10.151 140 4,016 13.947 488 51,936 680 Manufacturing 22,065,478 4.785 457 38,550 129,758 73.301 80.167 9.502 44.315 19.450 4.844 138, 312 80,862 5 2 - 28 31,972 27,469 2.469 1,339 1,076 268 7.455 2.590.299 320.628 482 234 220.217 314 607 2012 69 15.219 5 31 8,600 884 2.589 3.232 22 1.779 815 1 2.800 537 449 702 199 230 212,004 1.941 2.650 402 169 40.185 16,878 41 614 17 478 206 846 86.875 319,647 134 252 217.154 91.205 171.783 72.149 172.123 72.292 387,595 162.790 364 461 2 153,074 286,856 1,120,480 27.689 11,629 3.485 1.463 445,407 387,071 3.058 41.284 1.911 2803 18,636 1,340 116.956 GL# Expense Name 400 Direct Materials 500 Direct Labour costs 601 Indirect Labour - Plant 602 Indirect by Direct - Plant Hourly 603 Management Authorized Union Activity 604 Indirect by Direct - Tool Repairs 605 Indirect by Dir - Assist Maintenance 606 Indir X Dir. Assist Support Groups 607 Indir X Dir - Meetings 608 Indir Dir - Working Indirect 609 Indir X Dir - HR Issues 610 Indirect by Direct - General 612 Indirect by Direct - Graphics Print 615 Ind Labour-Hrly Wkly/Biwkdy Training 620 IX D-Continuous Improvement Time 622 Overtime Premium - Hourly 623 Vision Care 624 Orthodontic Care 625 Life / AD.D. Insurance 628 Nightshift Premium 629 Employment Insurance 630 Workmen's Compensation 631 Dental Coverage 632 Ontario Health Insurance Plan 633 Vacation Pay 634 Statuatory Holidays 635 Health 637 Pension Plan - Union 638 Pension Plan - Non Union 639 Recreation Club 640 Salaries - Weekly / Biweekly 642 Define Cont. Plan-Emplr 4 p.c. Base 643 Define Cont. Plan-Emplr 50 p.c. Matc 647 Absence/Lateness - Staff 649 Overtime Premium - Wkly / Biwidy 650 Canada Pension Plan 654 Safety Shoe Allowance 660 Welding Rods 661 Operating Supplies 662 Lubricants, Solvents & Coolants 663 Stationery & Printing 671 Tool Usage 674 Electrodes & Accessories 681 Light & Power 7.380 85 223 185,004 35,197 7,385 11,575 102.959 110.672 104.690 178,750 145.827 720,027 268,305 363,607 26,879 27,332 112 112 111,734 36,868 226, 115 521 282 77.751 244,010 17.000 1,485,060 144,010 57 680 62.969 88,585 73,546 8 242 8,398 118.162 59,366 132,004 119,154 186.742 166, 119 461.173 417,057 412,742 846,463 7.821 7.535 13.313 14,572 25.450 20,393 16.598 8.326 1.040 361 138 666 20.307 7,571 5.836 982 840 650 1. 201 15,874 4.208 2.184 1.518 7.182 4.165 10,615 22 25 223 TOTAL 30.470 274 15.025,322 3.778.971 935.422 423,304 105.605 9.686 57 814 39 218 5.353 192,869 113.515 30 269 151 647 280.126 520.958 42.109 22.803 411,175 245,003 682.630 816,555 853.024 1,360 220 1.057 688 1.756,132 3.607.135 3.275.737 462 365 36.962 3.130.735 249.108 172.720 89.432 43.472 1.296.867 32,068 1.062.949 1.380 431 137 347 111,186 613.880 2.286 232,161 113,308 27,702 85,153 96,655 17,312 167.962 138,957 134,142 177,997 4,418 46,470 20,856 90,509 89,210 897 30,000 7.951 776,497 4,575 182,056 861 67,050 4.800 378,954 19.593 12 245 2.896 86.949 310 12.008 18,828 450 647 11.024 494 1.540 26.248 1.175 736 41.237 74 469 400.102 9,863 783.798 247,783 13,170 723,640 9,663 261.087 855,900 222 12.316 75 2.161 17.328 154,019 1.602 295 22.743 17,320 61 277 41,134 673 1,425 109.088 136 341,340 260,088 12.316 75 232,161 2.211 17,328 154,019 136,981 62.010 122.286 5,565 1,602 890 38.124 44 483 24.568 1.516 15,632 3.400 1.109 10.760 7.130 23.936 195,105 502.455 158.251 294 225 66.978 4.857 6,426 7218 353 31.692 2,512 5.148 1.024 18.260 682 Water & Sewage 683 Heating - Natural Gas 684 FuelPropane 685 Telephone/Long Dist. Excl. Equip) 691 Furniture & Equip. Non Capital Aquis 693 Maint. -Building/Heating Vent/Grounds 694 Maintenance - Plant & Machinery 696 Maintenance - Company Vehicles 698 Janitorial Services 710 Travel & Entertainment 711 Travel (Meals-50pc) 712 Bank Charges 714 Education & Training 716 Membership Fees 720 Donations 721 Bank Int. Charges - Long & Short Ter 726 Operating Expense - Comp. Vehicles 729 Leased Facilities 732 Legal Fees 734 Audit Fees 736 Consultant Fees 740 Miscellaneous 742 Advertising 748 Computer Software - PC's 761 Insurance 762 Municipal Taxes 763 Depreciation 806 Miscellaneous Recoveries 4,120 112 211 31.854 82 393 29. 124 22.019 2.796 301.109 10.760 (425) 374,714 85 231 311,692 209.836 154 309 216.029 122 286 87 896 47 883 196 214 544 281 158 251 294 225 191 263 38,633 82 393 64 352 49.548 2.796 301.109 10.920 (425) 424 504 85.231 481,805 287.196 36 5.951 201.951 432.736 2.046.261 (42,788) 160 27,650 22.140 24.950 8,683 31,759 75.000 8.601 1,130 500 24.298 600 60,350 11.368 36 756 235 3.800 1.395 201,951 432.736 526,223 (39,000) 54.002 186,982 255,503 46.200 23.929 (2.733) 849.420 (1,006) 104.002 (50) Total Costs for Responsibility Centre 4.901,398 777,199 9.198,554 5,606,073 16,179,253 33.923 386 910.556 10.312.961 81.809.381 Other information Material Handling Chemical Treating HQ HR Building R+O Manufacturing Engineering Direct Labour (hours) 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 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 raw materials used in other business lines They also have 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 costs. Financial information is in Appendix A. Other information is in Appendix B. Customer are charged for Direct Labour, Direct Materials, applicable overhead and profit. Direct Labour costs are based on the average labour rate for each applicable category. Chemical Treatment costs are based on the average rate per hour. Overhead rates are based on the following allocation bases: Material Handling: value of materials handled Repair and Overhead (R+O): R+O Direct Labour costs Manufacturing: Manufacturing Direct Labour costs Engineering: Engineering Direct Labour costs Chemical Treating: Processing Hours K+D charges profit of 20% on labour and overhead costs, and 5% on direct material costs (for simplicity purposes, profit is not charged on Material Handling overhead). REQUIRED: 1. Briefly comment on the cost drivers for the support departments. (ie. Do you think they are appropriate, or can you come up with something else). 2. Using a Single Rate (ie. All overheads are in a single cost pool and the cost pool is allocated on the basis of total direct labour costs), what is the per centage markup that is applied to each direct labour dollar? 3. What are the rates for each business line based on the Direct Method? 4. Step-down method: A. What are the rates for each business line based on the Step-down method? B. Explain your reasoning for which order was chosen. 5. What are the rates for each business line based on the Reciprocal Method? 6. Based on the Direct Method, how much should be charged to a customer to repair a transmission that involves the following: R+O Hours: Manufacturing hours: Engineering hours: Chemical Treating: Direct Materials: 25 hours 15 hours 2 hours 1 hour $4,200 FINANCIAL INFORMATION NOTE: Direct Materials = GL 400 Direct Labour = GL 500 Overheads all other GL accounts Deparments 10 11 12 31 32 33 21 Material Handling 41 Chemical Treating HO HR Building Engineering 4.613,872 4.056.720 65 231 223,096 145 288 31 853 123 RO 3.790,924 6.117.915 461,110 103 214 1.409 10.151 140 4,016 13.947 488 51,936 680 Manufacturing 22,065,478 4.785 457 38,550 129,758 73.301 80.167 9.502 44.315 19.450 4.844 138, 312 80,862 5 2 - 28 31,972 27,469 2.469 1,339 1,076 268 7.455 2.590.299 320.628 482 234 220.217 314 607 2012 69 15.219 5 31 8,600 884 2.589 3.232 22 1.779 815 1 2.800 537 449 702 199 230 212,004 1.941 2.650 402 169 40.185 16,878 41 614 17 478 206 846 86.875 319,647 134 252 217.154 91.205 171.783 72.149 172.123 72.292 387,595 162.790 364 461 2 153,074 286,856 1,120,480 27.689 11,629 3.485 1.463 445,407 387,071 3.058 41.284 1.911 2803 18,636 1,340 116.956 GL# Expense Name 400 Direct Materials 500 Direct Labour costs 601 Indirect Labour - Plant 602 Indirect by Direct - Plant Hourly 603 Management Authorized Union Activity 604 Indirect by Direct - Tool Repairs 605 Indirect by Dir - Assist Maintenance 606 Indir X Dir. Assist Support Groups 607 Indir X Dir - Meetings 608 Indir Dir - Working Indirect 609 Indir X Dir - HR Issues 610 Indirect by Direct - General 612 Indirect by Direct - Graphics Print 615 Ind Labour-Hrly Wkly/Biwkdy Training 620 IX D-Continuous Improvement Time 622 Overtime Premium - Hourly 623 Vision Care 624 Orthodontic Care 625 Life / AD.D. Insurance 628 Nightshift Premium 629 Employment Insurance 630 Workmen's Compensation 631 Dental Coverage 632 Ontario Health Insurance Plan 633 Vacation Pay 634 Statuatory Holidays 635 Health 637 Pension Plan - Union 638 Pension Plan - Non Union 639 Recreation Club 640 Salaries - Weekly / Biweekly 642 Define Cont. Plan-Emplr 4 p.c. Base 643 Define Cont. Plan-Emplr 50 p.c. Matc 647 Absence/Lateness - Staff 649 Overtime Premium - Wkly / Biwidy 650 Canada Pension Plan 654 Safety Shoe Allowance 660 Welding Rods 661 Operating Supplies 662 Lubricants, Solvents & Coolants 663 Stationery & Printing 671 Tool Usage 674 Electrodes & Accessories 681 Light & Power 7.380 85 223 185,004 35,197 7,385 11,575 102.959 110.672 104.690 178,750 145.827 720,027 268,305 363,607 26,879 27,332 112 112 111,734 36,868 226, 115 521 282 77.751 244,010 17.000 1,485,060 144,010 57 680 62.969 88,585 73,546 8 242 8,398 118.162 59,366 132,004 119,154 186.742 166, 119 461.173 417,057 412,742 846,463 7.821 7.535 13.313 14,572 25.450 20,393 16.598 8.326 1.040 361 138 666 20.307 7,571 5.836 982 840 650 1. 201 15,874 4.208 2.184 1.518 7.182 4.165 10,615 22 25 223 TOTAL 30.470 274 15.025,322 3.778.971 935.422 423,304 105.605 9.686 57 814 39 218 5.353 192,869 113.515 30 269 151 647 280.126 520.958 42.109 22.803 411,175 245,003 682.630 816,555 853.024 1,360 220 1.057 688 1.756,132 3.607.135 3.275.737 462 365 36.962 3.130.735 249.108 172.720 89.432 43.472 1.296.867 32,068 1.062.949 1.380 431 137 347 111,186 613.880 2.286 232,161 113,308 27,702 85,153 96,655 17,312 167.962 138,957 134,142 177,997 4,418 46,470 20,856 90,509 89,210 897 30,000 7.951 776,497 4,575 182,056 861 67,050 4.800 378,954 19.593 12 245 2.896 86.949 310 12.008 18,828 450 647 11.024 494 1.540 26.248 1.175 736 41.237 74 469 400.102 9,863 783.798 247,783 13,170 723,640 9,663 261.087 855,900 222 12.316 75 2.161 17.328 154,019 1.602 295 22.743 17,320 61 277 41,134 673 1,425 109.088 136 341,340 260,088 12.316 75 232,161 2.211 17,328 154,019 136,981 62.010 122.286 5,565 1,602 890 38.124 44 483 24.568 1.516 15,632 3.400 1.109 10.760 7.130 23.936 195,105 502.455 158.251 294 225 66.978 4.857 6,426 7218 353 31.692 2,512 5.148 1.024 18.260 682 Water & Sewage 683 Heating - Natural Gas 684 FuelPropane 685 Telephone/Long Dist. Excl. Equip) 691 Furniture & Equip. Non Capital Aquis 693 Maint. -Building/Heating Vent/Grounds 694 Maintenance - Plant & Machinery 696 Maintenance - Company Vehicles 698 Janitorial Services 710 Travel & Entertainment 711 Travel (Meals-50pc) 712 Bank Charges 714 Education & Training 716 Membership Fees 720 Donations 721 Bank Int. Charges - Long & Short Ter 726 Operating Expense - Comp. Vehicles 729 Leased Facilities 732 Legal Fees 734 Audit Fees 736 Consultant Fees 740 Miscellaneous 742 Advertising 748 Computer Software - PC's 761 Insurance 762 Municipal Taxes 763 Depreciation 806 Miscellaneous Recoveries 4,120 112 211 31.854 82 393 29. 124 22.019 2.796 301.109 10.760 (425) 374,714 85 231 311,692 209.836 154 309 216.029 122 286 87 896 47 883 196 214 544 281 158 251 294 225 191 263 38,633 82 393 64 352 49.548 2.796 301.109 10.920 (425) 424 504 85.231 481,805 287.196 36 5.951 201.951 432.736 2.046.261 (42,788) 160 27,650 22.140 24.950 8,683 31,759 75.000 8.601 1,130 500 24.298 600 60,350 11.368 36 756 235 3.800 1.395 201,951 432.736 526,223 (39,000) 54.002 186,982 255,503 46.200 23.929 (2.733) 849.420 (1,006) 104.002 (50) Total Costs for Responsibility Centre 4.901,398 777,199 9.198,554 5,606,073 16,179,253 33.923 386 910.556 10.312.961 81.809.381 Other information Material Handling Chemical Treating HQ HR Building R+O Manufacturing Engineering Direct Labour (hours) 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
