Question: 15-16
Req: 1
Direct Cost: Invoiced cost of cotton roll 3.2
Indirect Cost: (b to i) 7.42
Over head rate =( Indirect cost/direct cost) 231.88%
(7.42/3.20)100
Req: 2
Reason
b. Processing of paperwork for purchase administrative tasks
c. Supplies room management fee space occupied by the item
d. Operating-room and patient-room handlilabor involved in transporting and handling supplies within the hospital.
e. Administrative hospital costs General overhead costs
f. Research-related recoupment research and development
g. Malpractice insurance costs Patient cost
h. Cost of treating uninsured patients Patient cost
i. Profit component percentage markup on the total cost
Req: 3
Contact hospital
file complaint
seek resolution
Insurance cover
Accept the charge.
Question: 15-31
Req: 1 - Stand-Alone Method Based on Individual Selling Price
Bundle price 1500
Particulars SP Allocation Rate Allocated SP
PC Tower 1150 0.575 862.5
Monitor 250 0.125 187.5
Color Laser Printer 600 0.30 450
Total SP. 2000 1.00 1500
Req: 2 - Stand-Alone Method Based on Individual Cost Per unit
Bundle price 1500
Cost/ unit Allocation Rate Allocated SP
PC Tower 375 0.469 703.1
Monitor 200 0.25 375.00
Color Laser Printer 225 0.281 421.9
Total SP. 800 1.000 1500.00
Req: 3 - Stand-Alone Method ( Physical Units)
Bundle price 1500
PC Tower 1 500
Monitor 1 500
Color Laser Printer 1 500
Total SP. 3
Req: 4
Individual cost per unit makes more sense, because it considers the cost incurred while production
Question: 15-18
Req: 1
Allocation Based on (120000)
Buedgeted Actual Rate - 2000
Cost 120000 112750 Budgeted Trips
Dark Trips 35 30 70000
Milk Trips 25 25 50000
60 55 120000
2000
Buedgeted rate per Budgeted round trip
Actual rate per actual round trip 2050.0
Req: 2
a. Budgeted Rate Based on Budgeted Round Trips
Advantages:
Simplicity and predictability in planning.
Easier for budgeting and forecasting costs.
Disadvantages:
May not reflect actual usage, leading to potential over- or under-allocation.
Can cause division performance evaluations to be skewed.
b. Budgeted Rate Based on Actual Round Trips
Advantages:
More accurate allocation based on actual usage, aligning costs with operational activity.
Provides insights into cost control relative to budgeted expectations.
Disadvantages:
Still uses a budgeted rate, which may not account for variances in costs.
Can create confusion if there are significant discrepancies between budgeted and actual costs.
c. Actual Rate Based on Actual Round Trips
Advantages:
Reflects true cost of operations based on actual activity.
Fairer allocation that can help with performance evaluations.
Disadvantages:
More variability in cost allocation can make budgeting and forecasting more complex.
Potential for significant fluctuations in cost allocations month-to-month based on actual usage.
Recommendation
I would recommend using the actual rate based on actual round trips for cost allocation. This method
Assumptions:
Each division's performance is evaluated based on operating income, making accurate cost allocatio
Fixed costs are considered constant across the analysis period and do not change significantly with u
All costs related to the trucking fleet are appropriately categorized as either variable or fixed.
Question: 15-33
Revenue $1,000
Stand-Alone Method
SP % OF ALLOCATION $ ALLOCATION
Room 750 $ 0.60 600
Spa 300 $ 0.24 240
Dinner 200 $ 0.16 160
1250 1000
Incremental allocation method
Case 1: Room ( Primary) 1000-750 = 250
SP % OF ALLOCATION
Room 750 $ 750.00
Spa 300/500*250 $ 150.00
Dinner 200/500*250 $ 100.00
750 $ 1,000.00
Case 2: Spa ( Primary) 1000-300 = 700
SP % OF ALLOCATION
Spa 300 $ 300.00
Room 750/950*700 $ 553.00
Dinner 200/950*700 $ 147.00
300 $ 1,000.00
Case 3: Dinner ( Primary) 1000-300 = 800
SP % OF ALLOCATION
Dinner 200 $ 200.00
Room 750/1050*800 $ 571.00
Spa 300/1050*800 $ 229.00
200 $ 1,000.00
Shapley Value method
Revenue 800
Room 750
Dinner 200
950
Room Dinner
Case 1 750 50 (800-750)
Case 2 600 200 (800-200)
Shapley Weighted average method
Room 3/4 600
Dinner 1/4 200
800
Req 2
Stand-Alone Revenue-Allocation Method:
Pros:
Simple and straightforward.
Clear rationale based on selling prices.
Cons:
May not reflect actual profitability or cost structure.
Ignores interactions between divisions.
Incremental Revenue-Allocation Method:
Pros:
Considers opportunity costs and actual impact on each division.
More reflective of real contribution to overall revenue.
Cons:
More complex and subjective.
Requires detailed knowledge of the incremental contribution of each division.
plies within the hospital.
ation Based on (120000) Allocation Based on (112750)
Rate - 2000 Rate 2050
actual trip actual trip
60000 61500
50000 51250
110000 112750
ational activity.
eted and actual costs.
ore complex.
ased on actual usage.
ost allocation. This method provides the most accurate reflection of the costs incurred by each division, promot
aking accurate cost allocations crucial.
ot change significantly with usage.
her variable or fixed.
each division, promoting fairness in performance evaluations and encouraging accountability for resource usage