Should Bonded use the new material and improve quality?

Should Bonded use the new material and improve quality?

Should Bonded use the new material and improve quality?
Should Bonded use the new material and improve quality?

Should Bonded use the new material and improve quality? Assume that inspection and testing costs of $132,000 per year will be reduced by $22,000 with the new materials. Fixed costs in the shaping department will remain the same whether 8,500 or 9,500 units are produced.

What other nonfinancial and qualitative factors should Bonded management consider in making the decision?

Assessment 3 Part 4: Allocation Methods Comparison

Allocate the cost to the service department using all three methods: direct, step, and reciprocal, then comment on your findings in a paragraph. Show all calculations.

Part 4 Scenario

Liberty Company has two service departments: administration and accounting, and two operating departments: domestic and international. Administration costs are allocated on the basis of employees and accounting costs are allocated on the basis of number of transactions. A summary of Liberty operations follows:

Liberty Company: Summary of Operations

 

Administration

Accounting

Domestic

International

Employees

25

45

180

Transactions

27,500

22,000

88,000

Department Direct Costs

$396,000

$158,400

$1,029,600

$3,960,000

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