Sep 19, 2017

# QUESTION 1 INDIRECT COST ALLOCATION: DIRECT METHOD SPRINT MANUFACTURING COMPANY HAS TWO…

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Question 1

Indirect Cost Allocation: Direct Method
Sprint Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded:

 Melting Department direct overhead \$ 175,000 Molding Department direct overhead 300,000 General plant management 90,000 Plant security 35,000
 Melting Molding Number of employees 25 45 Space occupied (square feet) 10,000 40,000 Machine hours 10,000 2,000 Direct labor hours 4,000 20,000

(a) Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments. (Round your answer to the nearest whole number. Do not round until your final answer.)

(b) Determine the total departmental overhead costs for the Melting and Molding Departments.
(c) Assuming the Melting Department uses machine hours and the Molding Department uses direct labor hours to apply overhead to production, calculate the overhead rate for each production department. (Round your answers to two decimal places.)

Question 2

Inventory Ratio Calculations
Delroi, Inc. provided the following data for 2013 and 2014:

 Inventory December 31, 2012 \$ 202,400 December 31, 2013 190,400 December 31, 2014 182,500 Cost of goods sold 2013 \$ 642,000 2014 724,000 Gross margin 2013 \$ 340,000 2014 410,000

Round all calculations to two decimal places.
(a) Calculate the inventory turnover ratio for 2013 and 2014.
(b) Calculate the gross margin return on inventory investment for 2013 and 2014.

Question 3

Interdepartment Services: Step Method
O’Brian’s Department Stores allocates the costs of the Personnel and Payroll departments to three retail sales departments, Housewares, Clothing, and Furniture. In addition to providing services to the operating departments, Personnel and Payroll provide services to each other. O’Brian’s allocates Personnel Department costs on the basis of the number of employees and Payroll Department costs on the basis of gross payroll. Cost and allocation information for June is as follows:

 Personnel Payroll Housewares Clothing Furniture Direct department cost \$ 7,800 \$ 3,200 \$ 12,200 \$ 20,000 \$ 16,750 Number of employees 5 4 8 16 4 Gross payroll \$ 6,000 \$ 3,300 \$ 10,600 \$ 17,400 \$ 8,100

(a) Determine the percentage of total Personnel Department services that was provided to the Payroll Department. (Round your answer to one decimal place.)
(b) Determine the percentage of total Payroll Department services that was provided to the Personnel Department. (Round your answer one decimal place.)
(c) Prepare a schedule showing Personnel Department and Payroll Department cost allocations to the operating departments, assuming O’Brian’s uses the step method.

For each department below, enter the total costs calculated from your schedule.

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