Question

8) For each of the following costs incurred at Brockton Hospital, indicate whether it would most
likely be a direct cost or an indirect cost of the specified cost object. (12 pts)
Cost   Cost Object Direct Cost/Indirect Cost
Example Catered food served to patients A particular patient Direct Cost direct cost
1 Wages of pediatric nurses Pediatric department ?
2 Heating the hospital Pediatric department ?
3 Salary of the head of pediatrics A particular pediatric patient ?
4. Lab tests by outside contractor A particular patient ?
5 Lab tests by outside contractor A particular department ?

9) The BSU Works assembles custom computers from components supplied by various
manufactures. The company is very small and its assembly shop and retail sales store are
housed in a single facility in Bridgewater, Mass. Listed below are some or the costs that are
incurred at the company. For each cost, indicate whether it would most likely be classified as
direct materials, direct labor, manufacturing overhead, selling, or an administrative cost. (10
pts)
A) The cost of a hard drive installed in a computer_______________________________.
B) The cost of advertising in the local newspaper________________________________.
C) The wages of the employees who assemble computers from components__________.
D) The salary of the assembly shop’s supervisor_________________________________.
E) The salary of the company’s accountant_____________________________________.

10) You have a summer job as an intern at Drones-R-Us, a company that manufactures spy cameras for remote controlled military drones. The company, which is privately owned, has approached a bank for a loan to help finance its growth. The back requires financial statements before approving the loan. You are tasked with classifying each cost listed as either a product cost or a period cost in order to prepare the FS for the bank. (10 pts)

Costs Product Cost or Period Cost

1 Depreciation on salespersons vehicles ?

2 The cost of packaging the company’s product ?

3 Lubricants used for machine maintenance ?

4 Factory supervisors salaries ?

5 Advertising costs ?

11) AG Corp uses a plantwide predetermined overhead rate of $22.70 per direct labor-hour. This POHR was based on a cost formula that estimated $272,400 of total manufacturing overhead cost for an estimated activity level of 12,000 direct labor-hours. The company incurred actual total manufacturing overhead cost of $267,000 and 11,600 total direct labor-hours during the period. Determine the amount of manufacturing overhead cost that would have been applied to all jobs during the period. (3 pts) Manufacturing overhead applied = $_______________

Formulas Y = a + bX Applied Overhead = POHR x Actual Direct Labor Hours POHR = Estimated total manufacturing overhead cost for the coming period / Estimated total units in the allocation base for the coming period

Answer 1

8)

Cost   Cost Object    Direct Cost / Indirect Cost

1. Wages Pediatric Department Direct Cost

2. Heating Pediatric Department Indirect Cost

3. Salary Pediatric Department Direct Cost

4. Lab Tests Contractor Direct Cost

5. Lab Tests Contractor Indirect Cost

9)

A. Direct material cost

B. Selling cost

C. Direct labor cost

D. Manufacturing overhead

E. Administrative cost

10)

Costs Product Cost ot Period Cost

1. Depreciation Period Cost

2. Packing Cost Product Cost

3. Lubricants Period Cost

4. Salaries Period Cost

5. Advertising Period Cost

11) Determination of amount of applied manufacturing overhead:

Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total units

= $ 272,400 / 12000 hours

= $  22.7 per direct labour hour.

Applied overhead = Predetermined overhead rate x Actual direct labor hours

= $ 22.70 x 11,600 hours

= S 263,320