You are employing two dish washers at $12 per hour with each working 10 hours per week.You learn about a new automatic dishwashi
ng machine that will let you use half as many dish washers. The cost is $3,000. How long would it take to recoup the cost of the machine in saved wages?
D. have separate cost allocation rates for each activity identified by the company CORRECT
There will be activity cost pool which, will be distribute among the product using different cost driver like machien hours, direct labor hours or other.
Explanation:
A. have the same cost allocation system as plantwide and departmental cost allocation systems
NO If it was, then it would not have a different name
B. have no cost allocation rates for each activity identified by the company
If we don't have rates to distrubte cost then, the allocation will be arbitrary
C. have combined cost allocation rates for each activity identified by the company
each should have different base cost driver if not, then they aren't different and should be combined.
The decision whether to lease out the machinery that is surplus to requirement or sell outrightly is dependent on the differential analysis performed below.In the analysis I have compared the profits under each option in order to guide the final decision:
Differential analysis as at 7th November(Sale or lease option)
Sell option lease option
revenue from sell/lease option $180,000 $200,000
Brokerage commission(5%*$180,000) ($9,000) -
costs of repairs,insurance and property taxes - ($34,400)
Profits $171,000 $165,600
The sell option provides $5400($171,000-$165,600) than the lease option,hence the sell option is preferred.
One would have expect that the lease option since it has more revenue to preferable but the costs of repairs,insurance and property taxes were also on the high side
