Reference no: EM131828709
Problem - Cost-Plus Contracts, Allocations, and Ethics
Pelton Instruments manufactures a variety of electronic instruments that are used in military and civilian applications. Sales to the military are generally on a cost-plus-profit basis with profit equal to 10 percent of cost. Instruments used in military applications require more direct labor time because "fall-safe" devices must be installed. (These devices are generally omitted in civilian applications.)
At the start of the year, Pelton estimates that the company will incur $60,000,000 of overhead, $6,000,000 of direct labor, and 600,000 machine hours. Consider the Model KV10 gauge that is produced for both civilian and military users:
Civilian Military
Direct material $3,000 $3,500
Direct labor $900 $1,200
Machine hours 100 100
Required
a. Calculate the cost of civilian and military versions of Model KV10 using both direct dollars and machines hours as alternative allocation bases
b. Explain why Pelton instruments may decide to use direct labor as an overhead allocation base.
c. Is it ethical for Pelton to select an allocation base that tends to allocate more of overhead costs to government contracts? Explain.
|
What is the opportunity cost of producing a model
: With respect to overhead, what is the opportunity, what is the opportunity cost of producing a Model 350 motor
|
|
Describe available infrastructure products
: Describe available infrastructure products, including gatekeepers and multipoint control units and compare their capabilities with routers and switches.
|
|
Business proposition phase of sales presentation
: This page-or pages-will serve as a visual aid (as shown on pages 213 and 215) that you show and discuss with your buyer during the business proposition phase
|
|
Predict the impact of environmental changes
: Suppose that an organization did not use processes that were designed and built to be agile, particularly when it comes to IS / IT technologies.
|
|
Calculate cost of civilian and military versions of model
: Calculate the cost of civilian and military versions of Model KV10 using both direct dollars and machines hours as alternative allocation bases
|
|
Describe the impact of telecommuting on energy conservation
: Describe the impact of telecommuting on energy conservation, IT operational costs, "green computing", and shifts in telecommuters' lifestyles.
|
|
Establish better study habits
: a. Counselor talking to a student: "To improve your science grade, Susie, you must establish better study habits."
|
|
Determine what parts of each statement are features
: In the following statements, determine what parts of each statement are features, advantages, or benefits.
|
|
Develop a business continuity plan for your organization
: Develop a business continuity plan for your organization. Describe the basic activities that must be managed by the BCP.
|