Reference no: EM131298471

Assessment

1. The maintenance department of Full Service Company budgets annual costs of $300,000 based on an expected level of activity for 2012. Those costs are allocated to two other departments of Full Service Company. Full Service Company is considering two bases for assigning costs to those departments: square feet occupied by the department and direct labor hours worked by the department. The following information is available:

	Department 1	Department 2
Square feet occupied by the department	20,000	30,000
Direct labor hours worked by the department	30,000	20,000

Calculate the costs allocated to each department using each allocation base. Which allocation base is more useful to management?

Your response should be at least 75 words in length.For problems, be sure to answer all questions and provide all requested information.

2. Check Company has several departments. One of those departments does only printing work for other departments of Check Company, and that department expects to print 1,000,000 documents for other departments at Check Company, and in producing those documents, expects to incur the following costs:

Salaries (fixed)	$12,000
Employee benefits (fixed)	$3,000
Depreciation (fixed)	$3,000
Utilities (fixed)	$1,000
Printing supplies (1 cent per document)	$20,000

Costs are assigned to two cost pools, fixed costs and variable costs. The costs are then assigned to the Executive Department and the Administrative Department at Check Company. Fixed costs are assigned on a lump-sum basis, 30% to the Executive department and 70% to the Administrative Department. The variable costs are assigned at a rate of $0.02 per document printed.

If 800,000 documents are printed during 2011, 320,000 documents for the Executive Department and 480,000 documents for the Administrative Department, calculate the costs allocated to the Executive Department.

For problems, be sure to answer all questions and provide all requested information. Your response should be at least 75 words in length.

3. Sterling Corporation reports the following information:

2009	2010	2011
Units sold	20,000	20,000	20,000
Units produced	20,000	24,000	16,000
Fixed production costs	$1,200,000	$1,200,000	$1,200,000
Variable production costs per unit	$200	$200	$200
Selling price per unit	$400	$400	$400
Fixed selling and administrative expenses	$400,000	$400,000	$400,000

4. Gigantic Company reports the following information for 2011:

Beginning inventory	0
Units produced	40,000
Units sold	38,000
Ending inventory	2,000
Variable costs per unit:
Manufacturing:
Direct materials	$100
Direct labor	$ 160
Manufacturing overhead	$ 40
Selling/administrative	$ 10
Total variable costs per unit	$ 310
Fixed costs:
Manufacturing overhead		$700,000
Selling and administrative		$200,000
Total fixed costs		$900,000

Gigantic Company sells its product for $820 per unit.

Prepare an income statement using absorption costing.

For problems, be sure to answer all questions and provide all requested information. Your response should be at least 75 words in length.