You are manager of a painting department of a large office complex. The painting department is responsible
Question:
Paint ( Gallons) Labor ( Hours)
50............ 200
80........... 125
100 ........... 100
125 ........... 80
200 ........... 50
Required:
a. How much paint and how much labor do you choose in order to minimize the total cost of the hall painting job? (Show calculations in a neatly labeled exhibit.)
b. The accounting department institutes an overhead allocation on labor. For every dollar spent on labor, $ 0.5625 of overhead is allocated to the paint department to cover corporate overhead items, including payroll, human resource, security, legal costs, and so forth. Now how much labor and paint do you choose to minimize the total accounting cost of the hall painting job? (Show calculations in a neatly labeled exhibit.)
c. Explain why your decisions differ between parts (a) and (b).
d. Explain why the accounting department might want to allocate corporate overhead based on direct labor to your painting department.
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Related Book For
Accounting for Decision Making and Control
ISBN: 978-0078025747
8th edition
Authors: Jerold Zimmerman
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