Posted: April 18th, 2016

Total repairs and maintenance of a university classroom building??

Farragut, Inc., uses activity-based costing to account for its chrome bumper
manufacturing process. Company managers have identified four manufacturing activities:
materials handling, machine setup, insertion of parts, and finishing. The budgeted
activity costs for 2010 and their allocation bases are as follows:
Activity Total Budget Cost Allocation Base
Materials Handling $ 6,000 Number of Parts
Machine Setup 3,300 Number of Setups
Insertion of Parts 54,000 Number of Parts
Finishing 80,000 Finishing direct labor hours
Total $143,300
Farragut expects to produce 1,000 chrome bumpers during the year. The bumpers
are expected to use 3,000 parts, require 20 setups, and consume 2,000 hours of
finishing time.
Requirements
1. Compute the cost allocation rate for each activity.
2. Compute the indirect manufacturing cost of each bumper.

Types of Cost Behavior
Identify the following planned costs as (a) purely variable costs, (b) discretionary fixed costs, (c) committed fixed costs, (d) mixed costs, or (e) step costs. For purely variable costs and mixed costs, indicate the most likely cost driver.
1. Total repairs and maintenance of a university classroom building.
2. Sales commissions based on revenue dollars. Payments to be made to advertising salespersons employed by radio station WCCO, Minneapolis.
3. Jet fuel costs of Southwest Airlines.
4. Total costs of renting trucks by the city of Nashville. Charge is a lump sum of $300 per month plus $.20 per mile.
5. Straight-line depreciation on desks in the office of an attorney.
6. Advertising costs, a lump sum, planned by ABC, Inc.
7. Rental payment by the Internal Revenue Service on a five-year lease for office space in a private office building.