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Problems 12-2, 12-4, 12-8, 13-1, 13-4, 13-8
Exercise 12-2
a.
Items
Direct
Cost
Indirect
Cost
Company president’s salary
X
Depreciation on crane used in commercial construction
X
Depreciation on home office building
X
Salary of corporate office manager
X
Wages of workers assigned to a specific construction project
X
Supplies used by the Commercial Construction Division
X
Labor on a particular house
X
Salary of the supervisor of commercial construction projects
X
Supplies, such as glue and nails, used by the Home Construction Division
X
Cost of building permits
X
Materials used in commercial construction projects
X
Depreciation on home building equipment (small tools such as hammers or
saws)
X
b.
Items
Direct
Cost
Indirect
Cost
Company president’s salary
X
Depreciation on crane used in commercial construction
X
Depreciation on home office building
X
Salary of corporate office manager
X
Wages of workers assigned to a specific construction project
X
Supplies used by the Commercial Construction Division
X
Labor on a particular house
X
Salary of the supervisor of commercial construction projects
X
Supplies, such as glue and nails, used by the Home Construction Division
X
Cost of building permits
X
Materials used in commercial construction project
X
Depreciation on home-building equipment (small tools such as hammers or
saws)
X

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c.
Items
Direct
Cost
Indirect
Cost
Company president’s salary
X
Depreciation on crane used in commercial construction
X
Depreciation on home office building
X
Salary of corporate office manager
X
wages of worker assigned to a specific construction project
X
Supplies used by the Commercial Construction Division
X
Labor on a particular house
X
Salary of the supervisor of commercial construction projects
X
Supplies, such as glue and nails, used by the Home Construction Division
X
Cost of building permits
X
Materials used in commercial construction projects
X
Depreciation on home-building equipment (small tools such as hammers or
saws)
X
Exercise 12-4
a.
Step 1 is to determine the allocation rate:
Allocation rate
Overhead cost
$437,000
for
=
–––––––––––––––
=
–––––––––––
=
overhead cost
Machine hours
2,300
Step 2 is to assign the cost by multiplying the allocation rate by the weight of the base
(cost driver):
Product
Allocation Rate
x
Weight of Base
=
Allocated Cost
Cups
$190
x
420
=
$ 79,800
Tablecloths
190
x
740
=
140,600
Bottles
190
x
1,140
=
216,600
Total
$437,000
b. Nevin may have chosen machine hours as the cost driver because the manufacturing process
could be machine-intensive or a clear relationship between machine hours and the use of
indirect costs could exist.

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Problems 12-2, 12-4, 12-8, 13-1, 13-4, 13-8 Exercise 12-2 a. Items Direct Cost Indirect Cost Company president’s salary X Depreciation on crane used in commercial construction X Depreciation on home office building X Salary of corporate office manager X Wages of workers assigned to a specific construction project X Supplies used by the Commercial Construction Division X Labor on a particular house X Salary of the supervisor of commercial construction projects X Supplies, such as glue and nails, used by the Home Construction Division X Cost of building permits X Materials used in commercial construction projects X Depreciation on home building equipment (small tools such as hammers or saws) X b. Items Direct Cost Indirect Cost Company president’s salary X Depreciation on crane used in commercial construction X Depreciation on home office building X Salary of corporate office manager X Wages of workers assigned to a specific construction project X Supplies used by the Commercial Construction Division X Labor on a particular house X Salary of the supervisor of commercial construction projects X Supplies, such as glue and nails, used by the Home Con ...
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