The Wells Manufacturing Company Maintenance Department budgets annual costs for $3,000,000 based on the expected level of operations for the next year. The costs will be assigned between two departments. Wells is considering two cost allocation bases for apartments: (1) square feet; (2) direct part-time labor. The following data is related with possible distribution base:

Production department 1

Square Feet: 20,000

Direct hourly labor: 30,000

Production department 2 Square Feet: 30,000 Direct hourly labor: 20,000

Determine the distribution of costs for the production departments using each of the bases. of distribution. Comment which distribution base is preferable.

Problem 3-3 The copy department at Apex Company does almost all of the photocopying for the copy department. copies and the administration department, budgeted the following costs for the year, based on the expected activity of 5,000,000 copies: Salaries (fixed) $60,000 Employee benefits (fixed) 15,000 Copiers depreciation (fixed) 15,000 Utilities (fixed) 2,000 Paper (variable, 1 cent per copy) 50,000 Ink (variable, i cent per print) 50,000

Costs are assigned to two cost groups, one is for fixed costs and the other is for fixed costs. variables. The costs are assigned to the sales department and the administration department. The fixed costs assigned on a lump sum basis, 30 percent to the sales department and 70 percent to the administration Department. Variable costs are allocated at the rate of 2 cents per copy. Determine the distribution of costs for the sales and administration departments. Assume that 4,000,000 copies are made during the year, 1,500,000 for the sales department and 2,500,000 for the administration department.

Problem 3-4 Inventory production in January 2008 Sullivan Manufacturing Company was 1,300 units. It expects to produce 8,800 units for the next 11 months of the year. Total production for 2008 is estimated at 10,100 units. Direct material costs are $65 and direct labor costs is $54. Sullivan Manufacturing Company expects to incur the following operating overhead manufacturing:

Production materials $4,730 Salary supervisor 195,000 Equipment depreciation 140,000 Utilities 38,000 Rental expenses factory facilities 100,000 Total $477,730 a. Determine the total costs of producing the 1,300 units in January. b. Are the costs determined in the actual or estimated requirement? Sullivan improves accuracy if you wait until December to determine the costs of the product?

Problem 3-5 Ferretera La Arboleda, Inc. has three departments: construction materials, machinery and home equipment. The following are indirect costs related to your operations:

payroll taxes Paper rolls for registers Health insurance Secretary salaries water bills Vacation payment Bill for sewage service staplers Electricity bill Pens Ink cartridges

a. Organize costs into the following cost combinations: indirect materials, indirect labor, and indirect utilities, assume that each department is cost of the object. b. Identify driver by cost mix. c. Explain why accountants use cost pooling.