CarryALL, Inc., makes and sells small cargo trailers to individuals and small bu
ID: 2793107 • Letter: C
Question
CarryALL, Inc., makes and sells small cargo trailers to individuals and small businesses. Since its opening in 1990, it has allocated indirect costs (IDC) to its three manufacturing plants based on direct materials cost per unit. Each plant builds different models and sizes. Because of advances in automation and materials, Judy, the CFO plans to use build-time per unit as the new basis. Build-time is the average number of work-hours to complete a trailer. However, she initially wants to determine what the allocation would have been this year had the build-time basis been used prior to the incorporation of new technology and materials. The data shown below represents average costs and times. Use this data and the bases indicated to determine the allocation rates and IDC allocation of $800,000 for this year for the three bases.
Fill the allocation rates and IDC allocation in the table.
Plant New York Virginia Tennessee Total Direct material cost, $ per unit 20,000 12,700 18,600 51,300 Previous build-time per unit, work-hours 400 415 580 1395 New build-time per unit, work-hours 425 355 480 1260Explanation / Answer
Allocation by materia cost:
Allocation for material of 1$ = 800000/51300 = 15.594
Allocation on basis of previous build up time:
Allocation for each buildup = $800,000/1395 =$573.4767
Allocation on the basis of new buildup time:
Allocation of each build up = $800,000/1260 =634.9206
Allocation by each basis, $ Allocation by each basis, $ Allocation by each basis, $ Material cost Previous build-time New build-time NY 311890.84 229390.68 269841.27 VA 198050.68 237992.83 225396.83 TN 290058.48 332616.49 304761.90 Total 800000.00 800000.00 800000.00