Problem 13-58
Insert your answers in the gray-shaded cells. Enter answers as formulas where appropriate.
If an answer is incorrect, the word “wrong” or an asterisk “*” will appear.
a. Administrative Costs :
Base: 800 Cost: 2,130,000$
% of Base Allocation
Legal/Acctg. 5.0% 106,500$
Maint./Eng. 7.5% 159,750
Proc. 50.0% 1,065,000
Finish. 37.5% 798,750
100.0% 2,130,000$
Legal/Accounting:
Base: 4,000 Cost: 1,786,500$
% of Base Allocation
Maint./Eng. 10.0% 178,650$
Proc. 40.0% 714,600
Finish. 50.0% 893,250
100.0% 1,786,500$
Maintenance/Engineering:
Base: 340 Cost: 2,708,400$
% of Base Allocation
Processing 40.0% 1,083,360$
Finishing 60.0% 1,625,040
100.0% 2,708,400$
Factory Overhead Rates:
Cost ÷ DLH =
Processing 10,382,960$ 400,000
Finishing 10,517,040$ 300,000
b.
Floor Space %
# of
Employees
%
Proc. 1,600 44% 400 57%
Finish. 2,000 56% 300 43%
3,600 700
Solution
Name:
Processing Finishing
Admin. 1,214,000$ 916,000$
Legal/Acctg. 739,000 941,000
Maint./Eng. 948,000 1,422,000
Total 2,901,000$ 3,279,000$
Factory Overhead Rates:
Cost ÷ DLH =
Processing 10,421,000$ 400,000
Finishing 10,479,000$ 300,000
c. Department
Base % Base %
Admin.(A) – 0.0% 800 16.7%
Legal/Acctg.(L)
40 5.0% – 0.0%
Maint./Eng.(M) 60 7.5% 400 8.3%
Processing 400 50.0% 1,600 33.3%
Finishing 300 37.5% 2,000 41.7%
800 100.0% 4,800 100.0%
Note: When you complete the table, the algebra to solve for A, L, and M will appear below.
Administration
A = $2,130 + .17L + .07M
L = $1,680 + .05A + .10M
M = $2,370 + .075A + .08L
A = $2,130 + .17($1,680 + .05A + .10M) + .07M
A = $2,130 +$285.60 + .0085A + .087M
.9915A = $2,415.60 + .087M
A = $2,436 + .088M
M = $2,370 + .075A + .08($1,680 + .05A + .10M)
M = $2,370 + .075A + $134.40 + .004A + .008M
.992M = $2,504.40 + .079A
M = $2,525 + .0796A
Maintenance/Engineering
Admin Legal/Acctg. Maint/Eng
Direct cost 2,130,000$ 1,680,000$ 2,370,000$
Administration (A) (2,677,000) 134,000 201,000
Legal/Accounting (L) 355,000 (2,087,000) 167,000
Maintenance/Engineering (M) 192,000 273,000 (2,734,000)
–$ –$ 4,000$
Factory Overhead Rates:
Cost ÷ DLH =
Processing 10,450,000$ 400,000
Finishing 10,448,000$ 300,000
Substituting M:
A = $2,436 + .088($2,525 + .0796A)
A = $2,436 + $222.20 + .007A
.993A = $2,658.20
A = $2,677
M = $2,525 + .078($2,677)
= $2,525 + $208.81
= $2,734
L = $1,680 + .05($2,677) + .10($2,734)
= $1,680 + $133.85 + $273.40
= $2,087
Insert your answers in the gray–shaded cells. Enter answers as formulas where appropriate.
OH Rate
25.96$ per DLH
35.06$ per DLH
# of Hours %
136 40%
204 60%
340
Solution
OH Rate
26.05$ per DLH
34.93$ per DLH
Base %
30 7.3%
40 9.8%
– 0.0%
136 33.2%
204 49.8%
410 100.0%
A = $2,130 + .17L + .07M
L = $1,680 + .05A + .10M
M = $2,370 + .075A + .08L
A = $2,130 + .17($1,680 + .05A + .10M) + .07M
A = $2,130 +$285.60 + .0085A + .087M
.9915A = $2,415.60 + .087M
A = $2,436 + .088M
M = $2,370 + .075A + .08($1,680 + .05A + .10M)
M = $2,370 + .075A + $134.40 + .004A + .008M
.992M = $2,504.40 + .079A
M = $2,525 + .0796A
Maintenance/Engineering
Proc. Finish.
7,520,000$ 7,200,000$
1,339,000 1,004,000
689,000 877,000
902,000 1,367,000
10,450,000$ 10,448,000$
OH Rate
26.13$ per DLH
34.83$ per DLH
Substituting M:
A = $2,436 + .088($2,525 + .0796A)
A = $2,436 + $222.20 + .007A
.993A = $2,658.20
A = $2,677
M = $2,525 + .078($2,677)
= $2,525 + $208.81
= $2,734
L = $1,680 + .05($2,677) + .10($2,734)
= $1,680 + $133.85 + $273.40
= $2,087