Hans Sorensen, Controller of Franklin Production, Has the Choice of Allocating

question 139

Essay

Hans Sorensen, controller of Franklin Production, has the choice of allocating indirect manufacturing cost using either direct manufacturing labour hours or manufacturing machine hours.If he uses labour hours for the month of January, Product A receives $312,000 in manufacturing overhead charges and Product B receives $448,000.When machine hours are used Product A receives $352,000 in manufacturing overhead charges while Product B receives only $408,000.Required:You are the department manager in charge of Product A and are strongly in favour of using labour hours.Of course, your co-manager, who is in charge of Product B, is strongly in favour of machine hours.What are some arguments you may be able to give for the allocation base that favours your department's product?

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Definitions:

New England

New England is a region located in the northeastern part of the United States, comprising six states: Maine, Vermont, New Hampshire, Massachusetts, Rhode Island, and Connecticut.

Potomac

A river in the Eastern United States, flowing into the Chesapeake Bay, and passing through Washington D.C.

Patriot Cause

The movement and ideological drive toward independence from British rule among the American colonies, particularly during the late 18th century.

Thomas Paine

A political activist and writer whose works, including "Common Sense" and "The American Crisis," were influential in the American Revolution and the promotion of democratic ideals.