McArthur Company has gathered the following data related to its production process of two of its products for the week ended April 30:
Model | Item #B200 | Item #C440 | ||||||
Quantity produced | 60 | 100 | ||||||
Unit-related material costs | $ | 42,000 | $ | 100,000 | ||||
Variable conversion costs | 72,000 | 300,000 | ||||||
Total direct costs | $ | 114,000 | $ | 400,000 | ||||
Indirect costs: | ||||||||
Indirect manufacturing costs | 163,200 | 272,000 | ||||||
Indirect operating costs | 255,000 | 425,000 | ||||||
Total indirect costs | 418,200 | 697,000 | ||||||
Total costs | $ | 532,200 | $ | 1,097,000 | ||||
The costs above that appear to be allocated rather than traced are:
Unit-related material costs.
Variable conversion costs.
Indirect manufacturing costs only.
All indirect costs.
The correct answer is
All indirect costs
Explanation
Total indirect cost for both items
= 418200 + 697000
= 1115200
Now we will allocate this cost based on number of units
Cost allocated to item B 200 = total indirectcost * no. of unit oof B 200 / total units
= 1115200 * 60/(60+100)
= $ 418200
Cost allocated to item C 440 = total indirectcost * no. of unit of C440 / total units
= 1115200 * 100/(60+100)
= $ 697000
The allocated cost matches with the total indirect cost in cost statment, so it means cost has been allocated. So the correct answer is
All indirect Costs.
Get Answers For Free
Most questions answered within 1 hours.