SOLUTIONS TO CHAPTER 2 PROBLEMS
Cost Measurement and The Cost Accounting System
2-1
RV
195000
VOH =
Ove
rh
ead
$
2-3 (a) Budget Allowances
Cost per square foot = $ 67000 / 31100
= $ 2.154 / sq.ft
Power bill per KWH = $ 17800 / 56350
= $ 0.316 / KWH
Machining 23500 x 115% = $ 27025
Finishing 3450 x 115% = $ 3968
Packing 500 x 115% = $ 575
Total = $ 46518
For Floor Space, (Budget Allowances)
Finishing 5460 4000 8620 3968 1108
Packing 2133 2100 4530 575 727
Total 21205 31100 67000 46518 20470.00
(b) Budgeted Overhead Costing Rate
Note: All rates are to be calculated at 100% of budget volume
Total OH @ 100% = sum (floor space, maintenance and electricity)
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i.e. For Forging $ 10770+$ 13000+$ 2623 = $ 26393
Blanket Rate for each Dept = Total OH rate (for each dept) / Normal DLH
i.e. For Forging $ 26393 / 3113 = $ 8.478 /hr, and so on.
2-4
2-5
Overall Overhead Rate = 180%
Machining
Finishing
Machine
Finishing
Total OH
DL $ O/H rate (%) OH Cost ($)
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2-6 Maintenance cost assigned for broaching A123
Present System:
Proposed System:
Maintenance cost for broaching
20% x 800000 = $160,000
`
2-7. If Mike staffs with 27 people per shift for the 20 days, he will incur labor charges of
hrs 8
days 20
shifts 3
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