6. A manufacturer serving the sea transport industry has five departments. Indir

Question

6. A manufacturer serving the sea transport industry has five departments. Indirect cost allocations for 1 month are detailed below, along with space assigned, direct labor hours, and direct labor costs for each department that directly manufactures radar and sonar equipment. Determine the manufacturing department allocation rates for redistributing the indirect cost allocation for testing and engineering (S38,000) to the other departments. Use the following bases to determine the rates: (a) space, and (b) direct labor costs. Actual Data for 1 Month Indirect Space. Direct Labor Cost Square Department Allocation, S Feet Hours Cost, S Housing Subassemblies45,000 18,000 1,000 103.250 20,000 10,000 480 31.680 Final assembly 10,000 10,000 600 12460 Testing 15,000 1.200 ngieing 19,000 2000

Explanation / Answer

ALLOCATION OF TESTING AND ENGEERING COST BETWEEN MANUFACTURING DEPARTMENT

                     BASIS              HOUSING                            SUB-                      FINAL

                                                                                                ASSEMBLIES       ASSWMBLY         TOTAL($)

TESTING     LABOUR

                      HOUR

      (480:1000:600)             3462                                       7212                       4326                       15000

Engineering                        SPACE

                (10:18:10)            5000                                       9000                       50000                    19000   

DIRECT LABOUR RATE PER HOUR= COST/HOUR

Housing               =31680/480=66

SUBASSEMBLIES=103250/1000=103.25

FINAL ASSEMBLY=12460/600=20.77

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