Fundamentals Of Cost Accounting (6th Edition)
6th Edition
ISBN: 9781259969478
Author: WILLIAM LANEN, Shannon Anderson, Michael Maher
Publisher: McGraw Hill Education
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Textbook Question
Chapter 2, Problem 64P
Cost Allocation with Cost Flow Diagram
Coastal Computer operates two retail outlets in Oakview, one on Main Street and the other in Lakeland Mall. The stores share the use of a central accounting department. The cost of the accounting department for last year was $180,000. Following are the operating results for the two stores for the year:
Required
- a. Allocate the cost of the central accounting department to the two stores based on:
- 1. Number of computers sold.
- 2. Store revenue.
- b. Draw a cost flow diagram to illustrate your answer to requirement (a), part (2).
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Assume you are the department B manager for Marley's Manufacturing. Marley's operates
under a cost-based transfer structure. Assume you receive the majority of your raw materials
from department A, which sells only to department B (they have no outside sales). After
calculating the operating income in dollars and operating income in percentage, analyze the
following financial information to determine costs that may need further investigation.
Marley's Manufacturing
Income Statement
Month Ending August 31, 2018
Dept. A
Dept. B
Sales
$22,000
$52,000
Cost of goods sold
10,780
27,040
Gross profit
$11,220
$24,960
Expenses:
Utility expenses
$880
$3,640
Wages expense
5,280
10,920
Costs allocated from corporate
1,980
14,560
Total expenses
$8,140
$29,120
Operating income/(loss) in dollars
$
$
Operating income/(loss) in percentage
%
Department B had an operating loss.
Department A had an operating loss.
Department B has a higher wage percent of sales.
Department A receives a higher percent…
Assume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw
materials from department A, which sells only to department B (they have no outside sales). After calculating the operating income in dollars and operating income in percentage,
analyze the following financial information to determine costs that may need further investigation.
Marley's Manufacturing
Income Statement
Month Ending August 31, 2018
Dept. A
Dept. B
Sales
$22,000
$50,000
Cost of goods sold
10,340
26,000
Gross profit
$11,660
$24,000
Expenses:
Utility expenses
$1,320
$2,500
Wages expense
5,280
10,000
Costs allocated from corporate
2,200
14,000
Total expenses
$8,800
$26,500
Operating income/(loss) in dollars
%$4
%
Operating income/(loss) in percentage
%24
Chapter 2 Solutions
Fundamentals Of Cost Accounting (6th Edition)
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