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COST ASSIGNMENT METHODS
Nizam Company produces speaker cabinets. Recently, Nizam switched from a traditional departmental assembly line system to a manufacturing cell in order to produce the cabinets. Suppose that the cabinet manufacturing cell is the cost object. Assume that all or a portion of the following costs must be assigned to the cell:
a. Depreciation on electric saws, sanders, and drills used to produce the cabinetsb. Power to heat and cool the plant in which the cell is locatedc. Salary of cell supervisord. Wood used to produce the cabinet housingse. Maintenance for the cell's equipment (provided by the maintenance department)f. Labour used to cut the wood and to assemble the cabinetsg. Replacement sanding beltsh. Cost of janitorial services for the planti. Ordering costs for materials used in productionj. The salary of the industrial engineer (she spends about 20 percent of her time onwork for the cell)k. Cost of maintaining plant and groundsl. Cost of plant's personnel officem. Depreciation on the plantn. Plant receptionist's salary and benefits
Required:
Identify which cost assignment method would likely be used to assign the costs of each of the preceding activities to the cabinet manufacturing cell: direct tracing, driver tracing, or allocation. When driver tracing is selected, identify a potential activity driver that could be used for the tracing.
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