GSU Management and Cost Accounting Questions

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1.The Oak Company’s copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity of 4,700,000 copies:

Salaries (fixed)$94,000

Employee benefits (fixed)11,750

Depreciation of copy machines (fixed)9,400

Utilities (fixed)4,700

Paper (variable, one cent per copy)47,000

Toner (variable, one cent per copy)47,000

The costs are assigned to two cost pools, one for fixed and one for variable costs. The costs are then assigned to the sales department and the administrative department. Fixed costs are assigned on a lump-sum basis, 40 percent to sales and 60 percent to administration. The variable costs are assigned at a rate of 2 cents per copy.

Assuming 4,470,000 copies were made during the year, 2,350,000 for sales and 2,120,000 for administration, calculate the copy department costs allocated to sales and administration.

2.Richetti Metal Works received an offer from a big-box retail company to purchase 2,640 metal outdoor tables for $192 each. Richetti Metal Works accountants determine that the following costs apply to the tables:

Direct material $112

Direct labor 44

Manufacturing overhead 61

Total $217

Of the $61 of overhead, $12 is variable and $49 relates to fixed costs. The $49 of fixed overhead is allocated as $0.98 per direct labor dollar.

(A) What will be the real effect on profit if the order is accepted?

(B) The profit will decrease or increase? by what $?