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27/08/2022
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|11 .Assume the company uses number of employees as an allocation base for bothsupport departments , calculate the support department costs allocated to eachproduction department using the step- down method , and then calculate an overheadrate per direct labour hour for each production department . Assume the FactoryAdministration cost is allocated first .( 1 1 marks )IV .Assume that Factory Administration costs are allocated based on total labour hours .List one advantage and one disadvantage of using such allocation base to allocatethe Factory Administration costs to other departments .( 4 marks )V .Assume the manager of the machining department at Gleason Company wants tooutsource some of the department’s work . Outsourcing would reduce direct labourhours and , therefore , reduce the amount of overhead allocated to the machiningdepartment when direct labour hours are used as an allocation base . Explain at leasttwo factors the manager should consider in deciding whether to outsource ?”( 3 marks )Assume the manager of the machining department has outsourced some tasks andhas presented the current period financial results to the company’s director offinance , Ronald Lee . Ronald analyses the current period results and notices thatwhile direct labour costs decreased in machining , outsourcing costs are slightly*higher this period than the prior period ‘s direct labour costs . Subsequently , Ronaldasks the machining department’s manager about these costs , the manager repliesthat outsourcing does cost more than using direct labour , but because the amount ofoverhead for the department decreases , it is more profitable . Explain what happenedto the overhead that is no longer allocated to machining ? Is the manager’s decisionbeneficial to Gleason Company as a whole ? Explain your answer .( 8 marks )
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