work
10/2/2014
Questions 1 to 4
Plant A produces chemical sprays and its entire production is categorized into 5 cost-consuming functions. The following table shows (in percentages) how one function precedes another, as projected by the management of Plant A:
Management* Recruitment
Chemicals
Laboratory Canning
Management
-
-
-
-
Recruitment
25%
-
-
-
-
Chemicals
25%
20%
-
-
-
Laboratory
25%
40%
100%
-
-
Canning
25%
40%
-
100%
-
-
*For instance, equal portions of the Management function precedes all other functions, as projected.
Function
(hours)
Direct Product Costs ($)
Indirect Product Costs ($)
Duration Required
Management
-
400,000
5,000
Recruitment
1,800,000
400,000
20,000
Chemicals
800,000
1,100,000
20,000
Laboratory
400,000
400,000
50,000
Canning
300,000
900,000
To account for the borne of indirect product costs in these functions, the management considered various approaches and finally chose a step-down approach in the sequence in which one function precedes another. For each batch of production, two separate cost applications would be made, at the completion of the
Laboratory function, as well as at the completion of the Canning function. The application amount is based on a predetermined rate for each function, and the actual duration required (in hours) for each respective function.
For this quarter, the management of Plant A had projected a total production of
10,000,000 cans with the following breakdown in requirement from the various functions: Based on the projections, what would be the predetermined rate for the application of indirect costs to production at the completion of the Canning function?
5,000
1.
2.
3.
4.
$0.12 per can
$24 per hour
$240 per hour
$400 per hour
25%
25%
25%
25%
Based on these projections, the predetermined
Questions 1 to 4
Plant A produces chemical sprays and its entire production is categorized into 5 cost-consuming functions. The following table shows (in percentages) how one function precedes another, as projected by the management of Plant A:
Management* Recruitment
Chemicals
Laboratory Canning
Management
-
-
-
-
Recruitment
25%
-
-
-
-
Chemicals
25%
20%
-
-
-
Laboratory
25%
40%
100%
-
-
Canning
25%
40%
-
100%
-
-
*For instance, equal portions of the Management function precedes all other functions, as projected.
Function
(hours)
Direct Product Costs ($)
Indirect Product Costs ($)
Duration Required
Management
-
400,000
5,000
Recruitment
1,800,000
400,000
20,000
Chemicals
800,000
1,100,000
20,000
Laboratory
400,000
400,000
50,000
Canning
300,000
900,000
To account for the borne of indirect product costs in these functions, the management considered various approaches and finally chose a step-down approach in the sequence in which one function precedes another. For each batch of production, two separate cost applications would be made, at the completion of the
Laboratory function, as well as at the completion of the Canning function. The application amount is based on a predetermined rate for each function, and the actual duration required (in hours) for each respective function.
For this quarter, the management of Plant A had projected a total production of
10,000,000 cans with the following breakdown in requirement from the various functions: Based on the projections, what would be the predetermined rate for the application of indirect costs to production at the completion of the Canning function?
5,000
1.
2.
3.
4.
$0.12 per can
$24 per hour
$240 per hour
$400 per hour
25%
25%
25%
25%
Based on these projections, the predetermined