Manufacturing Needed at Practical Capacity Production Level (Kilowatt-Hours) Average Expected Monthly Usage (Kilowatt-Hours) 10,000 9,000 Department Loretta Bently Melboum Eastmoreland Total 13,000 21,000 14,000 10,000 11,000 40,000 32,000 80,000 The expected monthly costs for operating the power plant during the budget year are $20,000: $8,000 variable and $12,000 fixed. 1. Assume that a single cost pool is used for the power plant costs. What budgeted amounts will be allocated to each manufacturing department if (a) the rate is calculated based on practical capacity and costs are allocated based on practical capacity and (b) the rate is calculated based on expected monthly usage and costs are allocated based on expected monthly usage? 2. Assume the dual-rate method is used with separate cost pools for the variable and fixed costs. Variable costs are allocated on the basis of expected monthly usage. Fixed costs are allocated on the basis of practical capacity. What budgeted amounts will be allocated to each manufacturing department? Why might you prefer the dual-rate method? Required

Manufacturing Needed at Practical Capacity Production Level (Kilowatt-Hours) Average Expected Monthly Usage (Kilowatt-Hours) 10,000 9,000 Department Loretta Bently Melboum Eastmoreland Total 13,000 21,000 14,000 10,000 11,000 40,000 32,000 80,000 The expected monthly costs for operating the power plant during the budget year are $20,000: $8,000 variable and $12,000 fixed. 1. Assume that a single cost pool is used for the power plant costs. What budgeted amounts will be allocated to each manufacturing department if (a) the rate is calculated based on practical capacity and costs are allocated based on practical capacity and (b) the rate is calculated based on expected monthly usage and costs are allocated based on expected monthly usage? 2. Assume the dual-rate method is used with separate cost pools for the variable and fixed costs. Variable costs are allocated on the basis of expected monthly usage. Fixed costs are allocated on the basis of practical capacity. What budgeted amounts will be allocated to each manufacturing department? Why might you prefer the dual-rate method? Required

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The production department of Headstrong Company has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Units to be produced 8,100 9,100 7,100 6,100 In addition, the beginning raw materials inventory for the first quarter is budgeted to be 1,950 kilograms and the beginning accounts payable for the first quarter are budgeted to be $3,490. Each unit requires 3.1 kg of raw material that costs $2.50 per kilogram. Management desires to end each quarter with an inventory of raw materials equal to 10% of the following quarter’s production needs. The desired ending inventory for the fourth quarter is 2,325 kilograms. Management plans to pay for 80% of raw material purchases in the quarter acquired and 20% in the following quarter. Each unit requires 0.6 direct labour-hours, and direct labour-hour workers are paid $19.5 per hour. Required: 1-a. Prepare the company's direct…
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Question 1 (Single-rate versus dual-rate methods for allocating support department costs)The Cincinnati power plant that services all manufacturing departments of Eastern MountainEngineering has a budget for the coming year. This budget has been expressed in the following monthlyterms:ManufacturingDepartmentNeeded at Practical CapacityProduction Level (KilowattHoursAverage Expected MonthlyUsage (Kilowatt-Hours)Loretta 13,000 10,000Bently 21,000 9,000Melboum 14,000 10,000Eastmoreland 32,000 11,000Total 80,000 40,000The expected monthly costs for operating the power plant during the budget year are $20,000: $8,000variable and $12,000 fixed.Required:1. Assume that a single cost pool is used for the power plant costs. What budgeted amounts will beallocated to each manufacturing department if:(a) the rate is calculated based on practical capacity and costs are allocated based on practicalcapacity and(b) the rate is calculated based on expected monthly usage and costs are allocated based…
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