Expert answer:Allocation of Costs, accounting homework
Answer & Explanation:DiscussionsTo participate in the following discussions, go to this week’s Discussion link in the left navigation.Allocation of Costs Analyze
the following scenario: Jump Hospital currently allocates all
maintenance department costs based on departmental square feet.
However, the manager of the pharmacy department has suggested that an
ABC approach be used for the portion of the maintenance department costs
that relate to repairing equipment. Her contention is that the
pharmacy has relatively little equipment that breaks. However, it must
subsidize many high-tech departments that require expensive equipment
repairs. Using the tables below, calculate the maintenance cost
assigned to the pharmacy using the existing method and using an ABC
approach. Clearly label your calculations in your analysis. Respond to
at least two of your classmates’ postings.
Maintenance Costs
Routine Maintenance
Repairs
Total
Volume (Square Feet)100,000
800
Labor Hours10,000
4000
14,000
Labor Cost/Hour$12.00
$18.00
$13.71
Supplies$20,000
$80,000
$100,000
Administration
$15,000
Department Information
Pharmacy
All Other Departments
Total
Square Feet2,000
98,000
100,000
Volume of Repairs3
797
800
Hours of Repairs6
3,994
4,000
Supplies Used for Repairs
$200
$79,800
$80,000
Investment Decision Analyze
the
following scenario: Duncombe Village Golf Course is considering the
purchase of new equipment that will cost $1,200,000 if purchased today
and will generate the following cash disbursements and receipts. Should
Duncombe pursue the investment if the cost of capital is 8 percent?
Why? Clearly label your calculations in your analysis. You must
respond to at least two of your classmates’ postings to receive full
credit.
Year
Cash Receipts
Cash Disbursements
Net Cash Flow
1
1,000,000
500,000
500,000
2
925,000
475,000
450,000
3
800,000
450,000
350,000
4
750,000
430,000
320,000
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