Cost allocation is often the centerpiece of conflict that is resolved in court cases. The litigation usually involves the dispute over how costs are allocated to a product or product line that is of interest to the plaintiff. This is particularly an issue when a company produces some products or services for a price-competitive market while other products or services are produced for a governmental unit on a cost-plus or reimbursement basis.

Nursing Care Inc., or NCI, operates both a small nursing home and retirement home. There is a single kitchen used to provide meals to both the nursing home and retirement home, meaning labor costs and utilities costs of the kitchen are shared by the two homes. There is also a centralized cleaning department that provides the cleaning services for both homes as well as the kitchen. The nursing home serves only indigent patients who are on Medicaid. The state Department of Health and Family Services (DHFS) reimburses NCI at Medicaid-approved cost reimbursement rates. The Medicaid reimbursement rates are based on cost information supplied by NCI. The relevant cost and allocation data for the most recent year appear in the following table.

Required:

1. Management of NCI currently allocates the kitchen and cleaning department costs based on the number of residents in each home. Determine the amount of service department costs assigned to each of the homes using this allocation base. (Round percentages to two decimal places in your calculations.)

2. DHFS auditors believe the step method of allocation should be used by first assigning cleaning costs based on square feet and then kitchen costs based on number of residents. Determine the amount of service department costs assigned to each of the homes using this allocation method. (Do not round percentage answers.)

If merchandise inventory is being valued at cost and the price level is decreasing, which of the three methods of costing--LIFO, FIFO, or weighted average will yield

a. the highest inventory cost

b. the lowest inventory cost

c. the highest gross profit

d. the lowest gross profit

2. A manufacturer shipped merchandise to a retailer on a consignment basis. If the merchandise is unsold at the end of the period, in whose inventory should the merchandise be included?

1. What are the three major elements of a product's cost in a manufacturing company. Think of two real-life products and name costs that would go into making each of those products.

Equipment that cost $398,100 and has accumulated depreciation of $318,900 is exchanged for equipment with a fair value of $160,000 and $40,000 cash is received. The exchange lacked commercial substance.

(a)

Calculate the gain to be recognized from the exchange.

What are the difficulties in determining appropriate cost allocation of a firms overhead costs?

If a product’s variable cost increases, the number of units needed to be sold to earn a target profit will:

25. An important application of regression in manufacturing is the estimation of cost of production. Based on DATA from Ajax Widgets relating cost (Y) to volume (X), what is the cost of producing 600 widgets?

1) On July 25 of this year, Taylor sold land with a cost of $15,000 for $40,000. Taylor collected $20,000 this year and is scheduled to receive $5,000 each year for four years starting next year plus an acceptable rate of interest. Taylor's gain recognized this year is

2) Tom and Kristi are married and file a joint return for 2019 with taxable income of $100,000 and tax preferences and adjustments of $65,000 for AMT purposes. Their regular tax liability is $13,792. What is the amount of their total tax liability?

Cost of Units Completed and in Process

The charges to Work in Process—Assembly Department for a period, together with information concerning production, are as follows. All direct materials are placed in process at the beginning of production.

Cost per equivalent units of $1.50 for Direct Materials and $2.40 for Conversion Costs.

a. Based on the above data, determine the different costs listed below.

If required, round your interim calculations to two decimal places.

b. Did the production costs change from the preceding period?
Yes

c. Assuming that the direct materials cost per unit did not change from the preceding period, did the conversion costs per equivalent unit increase, decrease, or remain the same for the current period?
Increase