Lavender Manufacturing Company began business in the current year. The company uses the simplified method to allocate
Question:
Lavender Manufacturing Company began business in the current year. The company uses the simplified method to allocate mixed services costs to production. The company's costs and expenses for the year were as follows:
Direct labor......................................$ 3,000,000
Direct materials....................................4,000,000
Factory supervision.................................800,000
Property tax on factory.............................100,000
Personnel department..............................400,000
Computer operations...............................250,000
General administration.............................550,000
Marketing............................................800,000
State income tax....................................200,000
....................................................$10,100,000
a. Determine Lavender's total production costs for the year.
b. Assume that the hourly pay for direct labor is much lower than the hourly pay for employees in general administration and that the employee turnover is much higher for production employees than for general administration employees. How should these facts affect the company's decision to use the simplified mixed services method to allocate mixed services costs to production?
Step by Step Answer:
South Western Federal Taxation Individual Income Taxes 2017
ISBN: 9781305873988
40th Edition
Authors: William H. Hoffman, David M. Maloney, William A. Raabe, James C. Young, Nellen