Lopez Plastics Company makes just two product lines, plastic casings for pens and plastic casings for cell phones. Pen casings have a simple design and a simple production process. The company produces them in high volumes, using 90% of its direct-labor time. Pen casings rarely require special customer support or engineering work. This means that indirect production-support costs, such as design engineering of the pen casings, will be small. Cell phone casings, in contrast, have a more complex design, and the company produces them in small volumes, accounting for only 10% of its direct labor time. Customers who buy cell phone casings have specific design requirements that cause much production engineering work. Most of the engineering work performed at Lopez Plastics supports the production of cell phones. LOADING... (Click the icon to view the process map and data.) Requirement 1. Use the letters D, I, and U to indicate how the cost of each resource cost would be classified; D = direct, I = indirect, and U = unallocated. Question content area bottom Part 1 Item D, I or U? 1. Depreciation of the plant 2. Resin used to make pen casings 3. Salary of plant manager 4. Salaries of cost accountants 5. Depreciation on computers used by engineers to design cell phone casings 6. Salaries of engineers 7. Salaries of operating labor processing pen casings 8. Travel costs of purchasing agent while investigating potential new suppliers of resin

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Lopez Plastics Company makes just two product lines, plastic casings for pens and plastic casings for cell phones. Pen casings have a simple design and a simple production process. The company produces them in high volumes, using 90% of its direct-labor time. Pen casings rarely require special customer support or engineering work. This means that indirect production-support costs, such as design engineering of the pen casings, will be small. Cell phone casings, in contrast, have a more complex design, and the company produces them in small volumes, accounting for only 10% of its direct labor time. Customers who buy cell phone casings have specific design requirements that cause much production engineering work. Most of the engineering work performed at Lopez Plastics supports the production of cell phones.

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Requirement

1.	Use the letters D, I, and U to indicate how the cost of each resource cost would be classified; D = direct, I = indirect, and U = unallocated.

Question content area bottom

Part 1

	Item	D, I or U?
1.	Depreciation of the plant
2.	Resin used to make pen casings
3.	Salary of plant manager
4.	Salaries of cost accountants
5.	Depreciation on computers used by engineers to design cell phone casings
6.	Salaries of engineers
7.	Salaries of operating labor processing pen casings
8.	Travel costs of purchasing agent while investigating potential new suppliers of resin

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