Problem 13. Problem 14

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Melvin McDonald
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1 Cost Accounting Acct 647 Professor authored homework problems Review of Matrix Operations Problem 13 Matrix addition 5 7 A = 3!3 B = 4! ! C = A + B Required: Solve for C Problem 14 Matrix multiplication 5 7 A = 3!3 B = 4! !5 12 C = A * B Required: Solve for C 153

2 Problem 15 Matrix multiplication 5 7!2 A =!2 3 4 A -1 = 4 10! ! ! ! ! C = A * A -1 Required: Solve for C 154

3 Cost Accounting Acct 647 Professor authored homework problems Department Cost Allocation Problem 16 Niagara Company has two service departments (designated below as S 1 and S 2 ) and three production departments (designated as P 1, P 2, and P 3 ). The schedule below shows overhead directly attributable to each department along with the percentages of service that each service department performs for other departments. Department S 1 S 2 P 1 P 2 P 3 S % 20% 40% 30% S 2 20% 0 50% 10% 20% Overhead before allocation $98,000 $117,600 $1,400,000 $2,100,000 $640, Reciprocal: First use the cyclical/interative approach. Then use matrices to solve for simultaneous equations (hint: use a spreadsheet program to get the inverse matrix). 155

4 Problem 17 During February Cronin Company experienced the following results. Department Maint(S 1 ) Engin(S 2 ) Admin(S 3 ) Milling(P 1 ) Machin(P 2 ) Maintenance 0 5% 5% 60% 30% Engineering 10% % 50% Administration 15% 10% 0 45% 30% Overhead before allocation $60,000 $90,000 $200,000 $0 $0 The service department direct costs were: maintenance, $60,000; engineering, $90,000; administration, $200, Reciprocal: Use matrices to solve for simultaneous equations (hint: use a spreadsheet program to get the inverse matrix). 156

5 Problem 18 The controller of PastItsPrime Manufacturing Company has prepared the following information related to operations for 19X6. Operating Departments Milling (P1) Refining (P2) Finishing (P3) Direct labor hours 141, , ,000 Direct labor cost $1,385,000 $2,416,000 $1,586,000 Direct overhead $2,740,000 $1,934,200 $1,017,000 Using various allocation bases, the controller developed the following estimates of percentages of service department effort devoted to other departments. Department (S1) (S2) (S3) (P1) (P2) (P3) S1 Personnel 0 10% 8% 17% 41% 24% S2 Admin 5% 0 11% 21% 35% 28% S3 Engineering 0 8% 0 38% 34% 20% OH to allocate $165,000 $486,000 $292,000 $0 $0 $0 1. Reciprocal: Use matrices to solve for simultaneous equations (hint: use a spreadsheet program to get the inverse matrix). 157

6 Problem 19 Niagara Company has four service departments (designated below as S 1, S 2, S 3, S 4 ) and four production departments (designated as P 1, P 2, P 3, P 4 ). The schedule below shows overhead directly attributable to each department along with the percentages of service that each service department performs for other departments. Dept S 1 S 2 S 3 S 4 P 1 P 2 P 3 P 4 S 1 0% 8% 22% 11% 31% 11% 7% 10% S 2 20% 0% 50% 10% 8% 0% 6% 6% S 3 13% 18% 0% 5% 3% 10% 21% 30% S 4 18% 21% 7% 0% 41% 3% 4% 6% Direct Overhead Cost $352,000 $273,000 $168,923 $823,945 $623,998 $289,534 $1,253,092 $423, Reciprocal: Use matrices to solve for simultaneous equations (hint: use a spreadsheet program to get the inverse matrix). 158

7 Problem 20 Niagara Company has six service departments (designated below as S 1, S 2, S 3, S 4, S 5, S 6 ) and three production departments (designated as P 1, P 2, P 3 ). The schedule below shows overhead directly attributable to each department along with the percentages of service that each service department performs for other departments. Dept S 1 S 2 S 3 S 4 S 5 S 6 P 1 P 2 P 3 S 1 0% 13% 22% 9% 15% 11% 5% 9% 16% S 2 30% 0% 11% 9% 6% 4% 10% 12% 18% S 3 13% 18% 0% 5% 4% 10% 35% 10% 5% S 4 5% 8% 7% 0% 18% 2% 21% 17% 22% S 5 4% 2% 4% 2% 0% 13% 40% 23% 12% S 6 14% 2% 4% 3% 2% 0% 20% 25% 30% Direct Overhead Cost $470,000 $821,000 $263,444 $1,316,555 $710,593 $153,598 $925,613 $1,389,411 $872, Reciprocal: Use matrices to solve for simultaneous equations (hint: use a spreadsheet program to get the inverse matrix). 159

8 Problem 21 Niagara Company has two service departments (designated below as S 1 and S 2 ) and three production departments (designated as P 1, P 2, and P 3 ). The schedule below shows overhead directly attributable to each department along with an allocation base for costs from each service department to all the rest. Department S 1 S 2 P 1 P 2 P 3 S 1 (sq ft) 0 1,800 2,700 3,100 2,400 S 2 (minutes) 24, ,000 18,000 42,000 Overhead before allocation $80,000 $140,000 $0 $0 $0 Required: Allocate the service department costs using each of the three methods (direct, step, and reciprocal). When using the step-down method, begin with the department that performs the largest percentage of service for For the reciprocal method, use matrices to solve for simultaneous equations. Solution hint: divide through to turn each raw item into percentages That means dividing by 10,000 sq. ft. and 120,000 minutes. 160

ACCT323, Cost Analysis & Control H Guy Williams, 2005

ACCT323, Cost Analysis & Control H Guy Williams, 2005 Cost allocation methods are an interesting group of exercise. We will see different cuts. Basically the problem we have is very similar to the problem we have with overhead. We can figure out the direct