Spring Manufacturing Company makes tents that it sells directly to camping enthu

Question

Spring Manufacturing Company makes tents that it sells directly to camping enthusiants through a mail-order marketing program. The company pays a quality control expert $108,000 per year to inspect completed tents before they are shipped to customers. Assume that the company completed 1,600 tents in January and 1,200 tents in February. For the entire year, the company expects to produce 15,000 tents.

Required

a. Explain how changes in the cost driver (number of tents inspected) affect the total amount of fixed inspection cost.

b. Explain how changes in the cost driver (number of tents inspected) affect the amount of fixed inspection cost per unit.

c. If the cost objective is to determine the cost per tent, is the expert's salary a direct or an indirect cost?

d. How much of the expert's salary should be allocated to tents produced in January and February?

Explanation / Answer

1)Explain how changes in the cost driver (number of tents inspected) affect the total amount of fixed inspection cost.
The cost driver here is tents inspected.
The number of tennts inspected in january and february = 1600+1200 = 2800 tents
The cost paying for expert = $108000
Total expected tents to produce = 15000
per unit = $108000 /15000
= $7.2
So During the january and february allocated cost = 2800 *7.2 =$20160
So the changes in total amount at march 1st = $108000 -$20160
= $87840(remain)
2) Explain how changes in the cost driver (number of tents inspected) affect the amount of fixed inspection cost per unit.
fixed inspection cost per unit = 108000 / 15000 = $7.2
3)If the cost objective is to determine the cost per tent, is the expert's salary a direct or an indirect cost?
it is direct cost, if it is estimated cost per unit ,then according to prduced tents ,the cost will be alloacated for the same period.So it is in the nature of "Direct cost"
4)
During january = 1600 *7.2 (cost per tent) = $11520 (allocated)
During February = 1200*7.2 = $8640(allocated)

1)Explain how changes in the cost driver (number of tents inspected) affect the total amount of fixed inspection cost.
The cost driver here is tents inspected. The number of tennts inspected in january and february = 1600+1200 = 2800 tents The cost paying for expert = $108000 Total expected tents to produce = 15000 per unit = $108000 /15000 = $7.2 So During the january and february allocated cost = 2800 *7.2 =$20160 So the changes in total amount at march 1st = $108000 -$20160 = $87840(remain) 2) Explain how changes in the cost driver (number of tents inspected) affect the amount of fixed inspection cost per unit. fixed inspection cost per unit = 108000 / 15000 = $7.2 3)If the cost objective is to determine the cost per tent, is the expert's salary a direct or an indirect cost?
it is direct cost, if it is estimated cost per unit ,then according to prduced tents ,the cost will be alloacated for the same period.So it is in the nature of "Direct cost" 4) During january = 1600 *7.2 (cost per tent) = $11520 (allocated) During February = 1200*7.2 = $8640(allocated)

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.