Scribd
Upload
72 views2 pages

Ponte, A. - Case 2-54

This document provides a summary of a case analysis for a managerial accounting class. It includes: 1. A list of costs classified as production, selling, administrative, direct materials, direct labor, or overhead. 2. A calculation of traceable costs per equipment hour by totaling certain costs and dividing by the total equipment hours. 3. An observation that some costs classified as direct could actually be traced directly to jobs without using an allocation base like equipment hours.

Uploaded by

drew_jive18
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
72 views2 pages

Ponte, A. - Case 2-54

This document provides a summary of a case analysis for a managerial accounting class. It includes: 1. A list of costs classified as production, selling, administrative, direct materials, direct labor, or overhead. 2. A calculation of traceable costs per equipment hour by totaling certain costs and dividing by the total equipment hours. 3. An observation that some costs classified as direct could actually be traced directly to jobs without using an allocation base like equipment hours.

Uploaded by

drew_jive18
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 2

Written Case Analysis

Name: Andrew C. Ponte


Chapter / Topic: Chapter 2 / Basic Managerial Accounting Concepts
Case Number: Case 2-54 (Cost Classification, Income Statement)
Date submitted: December 16, 2018

Case requirements:

1.
Production. Selling. Administrative
(DM) Pipe. Advertising. Utilities
(DL) Machine Operator. Admin. * Rent, office building
(DL) Other Direct Labor. CPA Fees
(OH) Supervisory Salaries. Admin. Salaries*
(OH) Salaries of Mechanics.
(OH) Tires and Fuel
(OH) Depreciation, equipment

*Administrative salaries are split between Selling and Administrative because


Jack spends his time equally in selling and administrative work.

2. Traceable cost using equipment hours:

Machine Operators $218,000.00


Other Direct Labor 265,700.00
Pipe 1,401,340.00
Tires and Fuel 418,600.00
Depreciation, 198,000.00
equipment
Salaries of Mechanics 50,000.00
Total $2,551,640.00

Machine operators, tires and fuel, and depreciation are all directly caused by
machine usage, which is measured by equipment hours. One can also argue
that maintenance is a function of equipment hours and so the salaries of
mechanics can be assigned using equipment hours. Pipe and other direct
labor can also be assigned using equipment hours because their usage
should be highly correlative with the equipment. That is, equipment hours
increased because there is more pipe being laid. As hours increase, so does
the pipe usage. A similar argument can be made for other direct labor.

Traceable cost per equipment hour = $2,551,640.00


18,200 hours

= $140.20 per hour


Concept/s or Theory/ies Used in Analyzing the Case:

1. The proper classification of cost in the income statement for the


manufacturing firm.

Additional Observations/Inputs:

1. It is not necessary to use equipment hours to assign pipe, machine


operators, and other direct labor because these two costs are directly
traceable to jobs.

Factual Experience:

Cost classification is vital especially to those organizations engaged in the


business sector. Although I don’t have any exposure as to the said sector
since I am working in the government as a state auditor, our audited agencies
which are Local Government Units prepare income statement currently known
as the statement of financial performance. As per observation in our audit, we
noted that proper classification of cost were adhered by our audited agencies
in accordance to the existing rules and regulations.

You might also like