Question
solution with explaination please
costs you think are most accurate, and explain why OCATION Wheelick 5-A3 DIRECT METHOD FOR SERVICE DEPARTMENT ALLOCAI strehe lick and Controls Company has two producing departments, Mec Electronic Instruments, In addition, there are two service departments, and Materials Receiving and Handling. The company purchases a variety or component for sale in domestic and interna parts from which the departments assemble instruments tional markets. - The Electronic Instruments division is highly automated. The manufacturing costs depend primarily on the number of subcomponents in each instrument. In contrast, the Mechanical Instruments division relies primarily on a large labour force to hand-assemble instruments. Its costs depend on direct-labour-hours. The costs of Building Services depend primarily on the square metres occupied. The costs of Materials Receiving and Handling depend primarily on the total number of compo- nents handled Instruments MI and M2 are produced in the Mechanical Instruments department, and and E2 are produced in the Electronic Instruments department. Data for these products El follow Direct-Labour-Hours MI M2 EI E2 Direct Materials Cost S74 86 63 Number of Components 25 10 1s Budget figures for 2012 include: Materials Handling S120,000 BuildingRecciving and Mechanical Electronic Direet department costs (excluding 150,0001 direct materials cost) Number of final instruments Average number of components S548,000 er instniment Direct-labour-hours 1. Allocate the costs of the service departments using the direct method. 2. Using the results of number 1, compute the cost per direct-labour-hour in the Mechanical Instruments department and the cost per component in the Electronic Instruments department. 3. Using the res 3. Using the resuls of number 2, compute the cost per unit of product for instruments M M2, E1, and E2.
Explanation / Answer
1.Statement Showing Secondary Distribution of Service Departments Cost to Primary Department(Direct Method)
Particulars Primary Dept ($) Service Dept($)
Mechanical Electronic Building MateriaLReceivingandHandling
1.Direct Department cost
(Ex Direct Material cost) 680,000 548,000 150,000 120,000
2.Building Services Allocation 93750 46875 - 9375
(Sq.meter)(10:5:1)(150000)
3.Material Receiving and 43125 86250 - -
Handling (Components)
(80000:160000)*129375
(120000+9375)
4.Total 816875 681125 - -
2.Calculation of cost per direct labour Hour in MI &Cost per component in EI
Particulars Mechanical Instrument Electronic instrument
1.Total Cost 816875 681125
2.Direct Labour Hours 30000 -
3.No of components - 160000(16k*10)
4.Cost per unit(1/2:1/3) 27.23 4.26
3.Statement Showing cost per Unit
Particulars m1 m2 e1 e2
1.Direct material cost(A) 74 86 63 91
2.Direct Labour Hours per unit 4 8 - -
3.No of components per unit - - 10 15
4.Cost per direct labour hour(B)(27.23 109(27.23*4) 218( 8*27.23) 42.6(10*4.26) 64(15*4.26)
Cost per component 4.26)
5.Total Cost (A+B) 183 304 106 155
