Skoda Company makes metal signs for business and residences. These signs are mad

Question

Skoda Company makes metal signs for business and residences. These signs are made of sheet metal, which the owner paints by hand. The owner is concerned that he does not have a good measure os support costs for the signs. Currently, he predicts support costs to be 30 % of the cost materials. Close investigation of the business reveals that $10 per direct labor hour is a more plausible and reliable support cost measure.

Skoda Company has the following information available:

                                  Small Sign       Larger sign

Materials cost                        $300     $700

Direct labor hours                       5        11

1. Using cost of materials as the cost driver, what amount of support costs is assigned to the Small sign?

2. Using cost of materials as the cost driver, what amount of support costs is assigned to the Larger sign?

3. Using direct labor hours as the cost driver, what amount of support costs is assigned to the Small sign?

4. Using direct labor hours as the cost driver, what amount of support costs is assigned to the Larger sing?

Explanation / Answer

1 Amount of support cost to the small design 30% of cost of material 30% of $300 $90 2 Amount of support cost to the larger design 30% of cost of material 30% of $700 $210 3 Amount of support cost to the small design $10*5 $50 4 Amount of support cost to the larger design $10*11 $110

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