1. Sasha Company allocates the estimated $195,600 of its accounting department c
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Question
1. Sasha Company allocates the estimated $195,600 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows:
Department Employees
Accounting 4
Production 25
Sales 17
How much of the accounting department costs will be allocated to the production?
2. The Manassas Company has 55 obsolete keyboards that are carried in inventory at a cost of $9,600. If these keyboards are upgraded at a cost of $6,500, they could be sold for $19,200. Alternatively, the keyboards could be sold "as is" for $7,100. What is the net advantage or disadvantage of re-working the keyboards?
Explanation / Answer
1.
Total accounting department cost=$195,600*4/46=$17,009
accounting department costs will be allocated to the production=$17,009*25/42=$10,124
2.
Loss before key boards are up graded=$7,100-$9600=-$2,500
Total cost if these keyboards are upgraded =$9,600+$6,500=$16,100
Gain if these keyboards are upgraded =$19,200-$16,100=$3,100
Net advantage of re-working the keyboards=$3,100+$2,500=$5,600
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