problem number 12-46 is the one in question 12-45 Direct M Karao Piano Compa add
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problem number 12-46 is the one in question
12-45 Direct M Karao Piano Compa addition, there are The company purchas for sale in domes The electronic piano the number of subco a act Method for Service Department Allocation s predictions of long-run usage? a Company has two producing departments, traditional pianos and electronic pianos. In ere are two service departments, building services and materials receiving and handling. y purchases a variety of component parts from which the departments assemble pianos in domestic and international markets. lectronic pianos division is highly automated. The manufacturing costs depend primarily on of subcomponents in each piano. In contrast, the traditional pianos division relies primanly or force to hand-assemble pianos. Its costs depend on direct-labor hours. osts of building services depend primarily on the square footage occupied. The costs of eceiving and handling depend primarily on the total number of components handled. Land M2 are produced in the traditional pianos department, and El and E2 are produced monic pianos department. Data about these products follow: The costs of building materials receiving an Pianos M1 and M2 in the electronic pianos dep MI Direct- Materials Cost $740 860 630 910 Number of Components 110 90 M2 Direct- Labor Hours 3.0 6.0 1.5 1.0 100 E2 200 Budget figures for 20X7 include the following: ge Building Service $1,500,000 Materials Receiving and Handling $1,200,000 Traditional Pianos $6,800,000 Electronic Pianos $5,480,000 IS- 5,000 Direct department costs (excluding direct materials cost) Square footage occupied Number of final pianos produced Average number of components per piano Direct-labor hours 50,000 8.000 100 30,000 25,000 10,000 160 8.000 = . Allocate the costs of the service departments using the direct method. 2. Using the results of number 1. compute the cost per direct-labor hour in the traditional pianos department and the cost per component in the electronic pianos department. cosing the results of number 2. compute the cost per unit of product for pianos M1, M2, E1, and E2. 10 Step-Down Method for Service Department Allocation Refer to the data in Problem 12-45. ocate the costs of the service departments using the step-down method. ng the results of number 1. compute the cost per direct labor hour in the traditional pianos ent and the cost per component in the electronic pianos department. as the results of number 2. compute the cost per unit of product for pianos MI, M2, EI, and E2. tlf Analysis 1. Allocate the cos 3Explanation / Answer
12-46). In step down approach cost of one service department is allocated to other department and after than cost of other service department is allocated to manufacturing department. Once cost of one department is allocated then no other cost is allocated to that department .
1).Cost of Building service department is allocated on the basis of Square footage occupied:
Total Squar footage = 5000+50000+25000 = 80000
Cost of Building service department = $1,500,000
Cost allocated to Material and service handling = 1500000/80000*5000 = 93750
Cost allocated to Traditional pianos department = 1500000/80000 * 50000 = 937500
Cost allocated to Electronicn pianos department = 1500000/80000*25000 = 468750
Now Cost of Material and Service handling = 1,200,000 + 93,750 Allocated cost = $1,293,750
Further this cost of Material and handling department is allocated to other manufacturing departmens:
Allocation is based on No. of components handled:
Total No. of components = (8000*100)+(10000*160) = 800,000+1,600,000 = 2,400,000
Cost allocated to Traditional pianos department = 1293750 / 2400000 * 800000 = 431250
Cost allocated to Electronicn pianos department = 1293750 / 2400000 * 1600000 = 862500
Total Cost of Traditional Pianos department = 6,800,000 + 937,500 + 431,250 = $8,168,750
Total Cost of Electronic Pianos department = 5,480,000 + 468,750 + 862,500 = $6,811,250
2). Cost per direct labour hour :
Traditinal Pianos = 8168750 / 30000 = 272.29
Electronic Pianos = 6811250 / 8000 = 851.41
3). Calculation of Cost per unit .:
M1 = Direct Material 740 + Direct Labour (272.29* 3 hrs) = 740 + 816.87 = $1556.87
M2 = Direct Material 860 + Direct Labour (272.29* 6 hrs) = 860+ 1633.74 = $2493.74
E1 = Direct Material 630 + Direct Labour (851.41* 1.5 hrs) = 630+ 1277.115 = $1907.115
E2 = Direct Material 910 + Direct Labour (851.41* 1 hrs) = 910+ 851.41 = $1761.41
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