6 Accounting Questions!

1. 12-2

Jeelani Construction Company is composed of two divisions: (1) Home Construction and (2) Commercial Construction. The Home Construction Division is in the process of building 12 houses and the Commercial Construction Division is working on 3 projects. Cost items of the company follow.

Company president’s salary

Depreciation on crane used in commercial construction

Depreciation on home office building

Salary of corporate office manager

Wages of workers assigned to a specific construction project

Supplies used by the Commercial Construction Division

Labor on a particular house

Salary of the supervisor of commercial construction projects

Supplies, such as glue and nails, used by the Home Construction Division Cost of building permits

Materials used in commercial construction projects

Depreciation on home building equipment (small tools such as hammers or saws)


a. Identify each cost as being a direct or indirect cost assuming the cost objects are the individual products (houses or projects).

b. Identify each cost as being a direct or indirect cost, assuming the cost objects are the two divisions.

c. Identify each cost as being a direct or indirect cost assuming the cost object is Jeelani Construction Company as a whole.

2) 12-4

Nevin Company makes three products in its factory: plastic cups, plastic tablecloths, and plastic bottles. The expected overhead costs for the next fiscal year include the following.


a. Allocate the budgeted overhead costs to the products.

b. Provide a possible explanation as to why Nevin chose machine hours, instead of labor hours, as the allocation base.

3) 12-8

Stevens Air is a large airline company that pays a customer relations representative $4,000 per month. The representative, who processed 1,000 customer complaints in January and 1,300 com- plaints in February, is expected to process 12,000 customer complaints during 2012.


a. Determine the total cost of processing customer complaints in January and in February.

b. Explain why allocating the cost of the customer relations representative would or would not be relevant to decision making.

4) 13-1

5) 13-4

Norman Concrete Company pours concrete slabs for single-family dwellings. Wayne Construc- tion Company, which operates outside Norman’s normal sales territory, asks Norman to pour 40 slabs for Wayne’s new development of homes. Norman has the capacity to build 300 slabs and is presently working on 250 of them. Wayne is willing to pay only $2,500 per slab. Norman esti- mates the cost of a typical job to include unit-level materials, $1,000; unit-level labor, $600; and an allocated portion of facility-level overhead, $700.


Should Norman accept or reject the special order to pour 40 slabs for $2,500 each? Support your answer with appropriate computations.

6) 13-8




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