Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 12, Problem 4CE
Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity:
- Four welding units, with a lease cost of $12,000 per year per unit
- Six welding employees each paid a salary of $50,000 per year (A total of 9,000 welding hours are supplied by the six workers.)
- Welding supplies: $300 per job
- Welding hours: Three hours used per job
During the year, the activity operated at 90 percent of capacity and incurred the actual activity and resource costs, shown on page 676.
- Lease cost: $48,000
- Salaries: $315,000
- Parts and supplies: $805,000
Required:
- 1. Prepare a flexible budget formula for the welding activity using welding hours as the driver.
- 2. Prepare a performance report for the welding activity.
- 3. What if welders were hired through outsourcing and paid $30 per hour (the welding equipment is provided by Foy)? Repeat Requirement 1 for the outsourcing case.
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Novo, Inc., wants to develop an activity flexible budget for the activity of moving materials.Novo uses eight forklifts to move materials from receiving to stores. The forklifts are also usedto move materials from stores to the production area. The forklifts are obtained through an operating lease that costs $18,000 per year per forklift. Novo employs 25 forklift operators whoreceive an average salary of $50,000 per year, including benefits. Each move requires the use of a crate. The crates are used to store the parts and are emptied only when used in production.Crates are disposed of after one cycle (two moves), where a cycle is defined as a move from receiving to stores to production. Each crate costs $1.80. Fuel for a forklift costs $3.60 per gallon. A gallon of gas is used every 20 moves. Forklifts can make three moves per hour and are available for 280 days per year, 24 hours per day (the remaining time is downtime for various reasons). Each operator works 40 hours per week and 50…
Activity-Based Flexible Budgeting
Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity:
• Four welding units, with a lease cost of $15,000 per year per unit
• Six welding employees each paid a salary of $58,000 per year (A total of 12,000 welding hours are supplied by the six workers.)
• Welding supplies: $400 per job
• Welding hours: 4 hours used per job
During the year, the activity operated at 95 percent of capacity and incurred the following actual activity and resource costs.
• Lease cost: $60,000
• Salaries: $365,400
• Parts and supplies: $1,134,200
Required:
1. Prepare a flexible budget formula for the welding activity using welding hours as the driver.
Welding cost
=
$fill in the blank e95687f99006fa4_1
+
$fill in the blank e95687f99006fa4_2 X
2. Prepare a performance report for the welding activity. In the last column of Foy Company Activity-Based…
A local financial consulting firm employs 30 full-time employees. The budgeted compensation per employee is $50,000. The annual maximum chargeable time to each client is
1,000 hours Clients always receive their full amount of time. All labour costs are included in a single direct cost category and are traced to jobs on a per-hour basis
Any other costs are included in a single indirect-cost pool, allocated according to professional labour hours Budgeted indirect costs for the year are $1,050,000, and the firm
expects to have 60 clients during the coming year
What is the budgeted indirect-cost rate per hour?
$35.00 per hour
O$50.00 per hour
$17 50 per hour
O $1,050 00 per hour
O $10.00 per hour
Chapter 12 Solutions
Cornerstones of Cost Management (Cornerstones Series)
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