CP2 - CH17 - Problems

Problem 17-24

 
 

• Facts
  
  • 
    

Service Department	Maint	Computing	Etching	Finishing
Maint (hours)	0	1000	1000	8000
Computing (minutes)	240000	0	840000	120000

• Maint budget
  
  • $96000
    
• Comp Budget
  
  • $500000
    
• Etching
  
  • $400000
    
  • 20*2000=40000 man hours
    
• Finishing
  
  • 640000
    
  • 80*2000=160000man hours
    

     
     

     
     

• Calculate rates using the direct method (To do this method you are making the assumption that the service departments are completely independent from one another)
  
  • Maint
    
    • 1000/9000=0.1111 to etching
      
      • .1111111*96000=$10666.6656
        
    • 8000/9000=0.8889 to finishing
      
      • .888888889*$960000=$853333.33
        
  • Computing
    
    • 84/96=0.875 to etching
      
      • .875*$500000=$437500.0
        
    • 12/96=0.125 to finishing
      
      • .125*$500000=$62500.00
        
  • Etching is = 400000+10667+437500=$848167
    
    • 848167/40000=21.2042 per dlh
      
  • Finishing is $640000+$85333+$62500=$787833.00
    
    • $787833.00/16000=$49.24 per DLH
      

       
       

       
       

• Calculate Rates Using Step Method (to use this method you are making the assumption that there is one reciprocity between service departments in this example that the computing department services the Maint dept but not vice versa)
  
  • Allocate computing
    
    • Maint
      
      • 240/1200=0.2
        
      • $96000+.2*500000=$196000.00
        

       
       

    • Etching
      
      • 840/1200=0.7
        
        • 400000+.7*500000+.1111111*196000=$771777.7756000
          
        • $771777.7756000/40000=$19.29
          

        
         

         
         

    • Finishing
      
      • 120/1200=0.1
        
        • $640000+.1*500000+.888888889*196000=$864222.22
          
        • $864222.22/160000=$5.4
          

           
           

• Pool the Service department costs (assuming reciprocity between multiple service departments)
  
  • Step 1 Reciprocal Table
    
    • 
      

From	Maint	Comp	Etch	Fin
Maint		.10	.10	.80
Comp	.20		.7	.10

• Step 2
  
  • Reciprocal Equation to pool service costs
    
    • M = $96000+.2C
      
    • C = $500000*.1M
      
      • M=$96000+.2($500000*.1m)
        
      • M=($96000+$100000+.2M)
        
      • .98M=196000
        
      • M = $196000/.98=$200000.00
        
      • C=$520000
        
• Maint = $200000*.1=$20000.00 to Etching $200000*.8=$160000.00 to finishing
  
• Computers = $520000*.7=$364000.0 to etching $520,000*.1=$52,000.00 to finishing
  

   
   

1. Etching = $20000+364000+400000=$784000.00
   
   1. $784000.00/40000=$19.6
      
2. Finishing = $160000+52000+640000=$852000.00
   
   1. $852000.00/160000=$5.33
      

       
       

       
       

       
       

1. PROBLEM 17-27
   
   1. Calculate the plant wide overhead rate for travelcraft inc. for the coming year using the same method used in the past
      

       
       

      1. 36800 power+8000 maint=44800
         
         1. Molding = $42000
            
            1. 500 dlh
               
         2. Component = $32400
            
            1. 2000 dlh
               
         3. Assembly= $45200
            
            1. 1500 dlh
               
   2. 164400/4000=$41.1 per dlh overhead