CASE 5A -- GLASER HEALTH PRODUCTS <?xml:namespace prefix = o ns = \"urn:schemas-

Question

CASE 5A -- GLASER HEALTH PRODUCTS <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Glaser Health Products of Ranier Falls, Georgia, is organized functionally into three divisions: Operations, Sales, and Administrative. Purchasing, receiving, materials and production control, manufacturing, factory personnel, inventory stores, and shipping activities are under the control of the vice-president for operations, George Gottlieb. Advertising, market research, and sales are the responsibility of the vice-president for sales, Jake Bogan. Accounting, budgeting, the firm's computer center, and general office management are delegated to the corporate controller (Administrative), Charlie Kaplan. The following cost categories are found in the company as a whole: (a) Depreciation on factory equipment. (b) Depreciation on office equipment. (c) Depreciation on factory building. (d) Advertising manager's salary. (e) Assembly foreman's salary. (f) Salespersons' salaries. (g) Salespersons' travel expenses. (h) Supplies for the Machining Department. (i) Advertising supplies used. (j) Electricity for the Assembly Department. (k) Lost materials (scrap) in a Machining Department.   (l) Direct labor in the Assembly Department. (m) Supplies for the sales office. (n) Sales commissions. (o) Packing supplies. (p) Cost of hiring new employees. (q) Payroll fringe benefits for workers in the Shipping Department. (r) Supplies for Production Scheduling. (s) Cost of repairing parts improperly manufactured in the Machining Department. (t) Paint for the Assembly Department. (u) Heat, light, and power for the factory. (v) Leasing of computer equipment for the Accounting Department.

Question: Organize these classifications by division: Operations, Sales, and Administrative. 3 Specify an appropriate cost driver for tracing costs associated with the various levels of activities to the next cost objective or products, whichever is appropriate.Create a chart to classify

Explanation / Answer

1. Identify each of the costs with the appropriate division: Operations, Sales, Administrative. Cost Division (a) Depreciation on factory equipment. Operations =========================================================================================================================================================================================== (b) Depreciation on office equipment. Admistrative =========================================================================================================================================================================================== (c) Depreciation on factory building. Operations =========================================================================================================================================================================================== (d) Advertising manager's salary. Sales =========================================================================================================================================================================================== (e) Assembly foreman's salary. Operations =========================================================================================================================================================================================== (f) Salespersons' salaries. Sales =========================================================================================================================================================================================== (g) Salespersons' travel expenses Sales =========================================================================================================================================================================================== (h) Supplies for the Machining Operations Department. =========================================================================================================================================================================================== (i) Advertising supplies used. Sales =========================================================================================================================================================================================== (j) Electricity for the Assembly Department. Operations =========================================================================================================================================================================================== (k) Lost materials (scrap) in a Machining Operations Department. =========================================================================================================================================================================================== (l) Direct labor in the Assembly Operations Department. =========================================================================================================================================================================================== (m) Supplies for the sales office. Sales (n) Sales commissions. Sales =========================================================================================================================================================================================== (o) Packing supplies. Operations =========================================================================================================================================================================================== (p) Cost of hiring new employees. Operations =========================================================================================================================================================================================== (q) Payroll fringe benefits for workers in Operations the Shipping Department. =========================================================================================================================================================================================== (r) Supplies for Production Scheduling. Operations =========================================================================================================================================================================================== (s) Cost of repairing parts improperly Operations manufactured in the Machining Department. =========================================================================================================================================================================================== (t) Paint for the Assembly Department Operations =========================================================================================================================================================================================== (u) Heat, light, and power for the factory. Operations =========================================================================================================================================================================================== (v) Leasing of computer equipment for the Administrative Accounting Department. =========================================================================================================================================================================================== 2. Identify each of the costs with one of the following: (a) Unit-level activities. (c) Product-level activities. (b) Batch-level activities. (d) Facility-level activities. Cost (a) Depreciation on factory equipment. (b) Depreciation on office equipment. (c) Depreciation on factory building. (d) Advertising manager's salary. (e) Assembly foreman's salary. Activity Facility level activities Batch level activities Facility level activities Facility level activities Unit level activities ===========================================================================================================================================================================================

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