Reference no: EM131323479

Question 1 High-low method

Tucson Tractor Inc. has accumulated the following data over a six month period

	Indirect Labor Hours	Indirect Labor Costs
January.........................	400	$ 6,000
February.......................	500	7,000
March...........................	600	8,000
April .............................	700	9,000
May..............................	800	10,000
June..............................	900	11,000
	3,900	$51,000

Separate the indirect labor into its fixed and variable components, using the high-low method.E4-5 High-low method Phoenix Plastic Inc. has accumulated the following data over a six-month period:

Separate the machine-related costs into their fixed and variable components, using the high-low method.

E4-6 Computing unit costs at different levels of production

Scentsation Inc. budgeted for 12,000 bottles of perfume Oui during May. The unit cost of Oui was $20, consisting of direct mate¬rials, $7; direct labor, $8; and factory overhead, $5 (fixed, $2; variable, $3).

a. What would be the unit cost if 10,000 bottles were manufactured? (Hint You must first determine the total fixed costs.)

b. What would be the unit cost if 20,000 bottles were manufactured?

c. Explain why a difference occurs in the unit costs.

E4-8 Direct method and sequential method of distributing service department costs

A manufacturing company has two service and two production departments. Building Maintenance and Factory Office are the service departments. The production departments are Assembly and Machining.

The following data have been estimated for next year's operations:

Direct labor hours:     Assembly, 80,000; Machining, 40,000

Floor space occupied: Factory Office, 10%; Assembly, 40%; Machining, 50%

The direct charges identified with each of the departments are as follows:

Building maintenance.........................................	$ 90,000
Factory office....................................................................	171,000
Assembly.........................................................................	378,000
Machining .......................................................	328,000

The building maintenance department services all departments of the company, and its costs are allocated using floor space occupied, while factory office costs are allocable to Assembly and Machining on the basis of direct labor hours.

1. Distribute the service department costs, using the direct method.

2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.