Question

2. Assume the cost object is the Manufacturing Department and that its total output is 15,500 units. a. How much total manufacturing cost is directly traceable to the Manufacturing Department

Answer 1

Answer:

There are three stages of assignment of costs to each product and these are as under:

1. Allocation
2. Apportionment
3. Absorption / Activity Based costing

So this question relates to stage one. Suppose the following situation:

There are 2 departments and they have following expenses

Department A has a supervisor whose annual salary is $30000

Department B has a worker whose annual salary is $22000

Department A & B have shared a rented property for there operations.

Department A and B also shares electricity bills and annual electricity charges stand almost $80,000

Now the directly attributable / traceable cost to Department A are those that are hundred percent related to Department A. In this example, we saw that supervisor salary is the only cost that is hundred percent related to Department A. Likewise Worker's salary is also relateable to Department B. Whereas the rental cost and electricity bills are not directly attributable to these departments. So this means the manufacturing costs that are directly traceable are those that hundred percent relates to the manufacturing departments.