Renton CoHas Two Operating (Production)departments Supported by a Number of Service

question 132

Essay

Renton Co.has two operating (production)departments supported by a number of service departments.The following information was collected for a recent period:
$\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad \underline {\text { Direct costs }}\\\begin{array}{lrrr}& \text { Machining }& \text { Assembly }& \text { Indirect }\\& \underline {\text { Department }}& \underline {\text { Department } }& \underline {\text { Cost }}\\\text { Salaries } & \$ 122,400 & \$ 85,700 & \$ 36,700 \\\text { Insurance } & 20,200 & 11,000 & 5,500 \\\text { Utilities } & 23,900 & 13,900 & 2,000 \\\text { Depreciation } & 20,700 & 11,500 & 13,800 \\\text { Maintenance } & 7,000 & 4,700 & 29,400 \\\text { Office expenses } & -0- & -0- & 71,100\\\text { Cost of goods sold }&327,600 & 121,200\end{array}\end{array}$ Indirect costs are allocated as follows: salaries on the basis of sales, office expenses on the basis of the number of employees, and all other costs on the basis of square footage.Additional information about the production departments follows:
$$\begin{array} { l c c } & \text { Square } & \text { Number of } \\&\underline { \text { Footage }} & \underline {\text { Ernployees} } \\\text { Machininig } & 14,535 & 78 \\\text { Assembly } & 4,845 & 52\end{array}$$ Sales for the Machining Department are $724,404 and sales for the Assembly Department are $356,796.Determine the departmental contribution to overhead and the departmental net income for each production department.

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Definitions:

Inflation Rate

The enhancement of the overall price tag of goods and services in an economy throughout a specific period.

Consumer Price Index

A statistical estimate that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, calculated by taking price changes for each item in the predetermined basket of goods and averaging them.

Inflation Rate

The percentage increase in the price level of goods and services in an economy over a period of time, indicating the rate at which purchasing power is eroding.

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, as an indicator of inflation or deflation.