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BUS 630 Case 5A Glaser Health Products

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BUS 630 Case 5A Glaser Health Products
1. Identify each of the costs with the appropriate division: Operations, Sales, Administrative.
2. Identify each of the costs with one of the following:
(a) Unit-level activities. (c) Product-level activities.
(b) Batch-level activities. (d) Facility-level activities.
Organize these classifications by division: Operations, Sales, Administrative.
3. Specify an appropriate cost driver for tracing costs associated with the various levels of activities to the next cost
objective or products, whichever is appropriate.
4. Glaser Health Products is interested in using activity-based costing to identify as many costs as possible with the
products. These costs will be used for planning and control decisions rather than for inventory valuation. The
controller decided that all operation costs will be related to products but only those sales and administrative costs that
are classified as unit-level, batch-level, or product-level costs
should be related to products. Using preliminary stage cost drivers, explain how individual items of costs will be
traced to activity groupings.
5. Using primary stage cost drivers, show how the costs should be related to products.
6. Explain why it is necessary to use preliminary stage and primary stage cost drivers
Answer
1. Identify each of the costs with the appropriate division: Operations,
Sales, Administrative.
Cost Division
(a) Depreciation on factory
equipment.
Operations
(b) Depreciation on office
equipment.
Admistrative
(c) Depreciation on factory building. Operations

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(d) Advertising manager's salary. Sales
(e) Assembly foreman's salary. Operations
(f) Salespersons' salaries. Sales
(g) Salespersons' travel expenses Sales
(h) Supplies for the Machining
Department.
Operations
(i) Advertising supplies used. Sales
(j) Electricity for the Assembly
Department.
Operations
(k) Lost materials (scrap) in a
Machining Department.
Operations
(l) Direct labor in the Assembly
Department.
Operations
(m) Supplies for the sales office. Sales
(n) Sales commissions. Sales
(o) Packing supplies. Operations
(p) Cost of hiring new employees. Operations
(q) Payroll fringe benefits for
workers in the Shipping Department.
Operations
(r) Supplies for Production
Scheduling.
Operations
(s) Cost of repairing parts improperly
manufactured in the Machining
Department.
Operations
(t) Paint for the Assembly
Department
Operations
(u) Heat, light, and power for the
factory.
Operations
(v) Leasing of computer equipment
for the Accounting Department.
Administrative
2. Identify each of the costs with one of the following:
(a) Unit-level activities. (c) Product-level activities.
(b) Batch-level activities. (d) Facility-level activities.

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