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Pacific Airlines has three service departments; ticketing, baggage handling, and aircraft maintenance. Costs of these departments are allocated to two revenue producing departments, domestic and international flights. Costs for the service departments are not separated into fixed and variable and the totals are as follows: Ticketing $4,000,000 Baggage handling $2,000,000 Aircraft maintenance $6,000,000 Air miles are as follows: Domestic 10,000,000 International 30,000,000
(a) Allocate the service department costs based on air miles.
(b) Evaluate World Airlines use of air miles as a basis for allocation. Do you think the cause-and-effect relationship is strong?
(c) Suggest alternative methods to allocate the service department costs.
The production involves a two-stage process. Stage 1 Moulding Process involves melting raw plastic resins and mixing them with colour pigments. The heated mixture is then injected into a multiple-cavity mould to form syringes
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Determine the total cost allocation and departmental overhead rate for the producing departments using the direct method. Show your work.
What is the minimum transfer price that the Amber division should be willing to charge the Conley division for the 40,000 components it needs to produce the charger?
As you run the simulation keep track of your decisions and keep track of the results - both financial and marketing. You can copy and paste the results into Excel or into a Word document.
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GHI Company makes light-weight canoes for campers. The president, George Ingalls, enlists your help in predicting the effects of some changes he is contemplating. He gives you the following information:
Prepare a schedule of cost of goods manufactured for the month. Prepare a schedule of cost of goods sold for the month.
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After reviewing its cost structure (variable costs of £7.50 per unit and monthly fixed costs of £60,000) and its potential market, the Forecast Company established what it considered to be a reasonable selling price.
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