Question

Camp Manufacturing Company makes tents that it sells directly to camping enthusiasts through a mail-order marketing program. The company pays a quality control expert $80,000 per year to inspect completed tents before they are shipped to customers. Assume that the company completed 1,600 tents in January and 1,200 tents in February. For the entire year, the company expects to produce 20,000 tents. Required c. If the cost objective is to determine the cost per tent, is the expert's salary a direct or an indirect cost? d. How much of the expert's salary should be allocated to tents produced in January and February? Complete this question by entering your answers in the tabs below. Required C Required D If the cost objective is to determine the cost per tent, is the expert's salary a direct or an indirect cost? is the expert's salary a direct or an indirect cost? Required D >

Answer 1

Question C

Indirect Cost

Expert Salary is a type of overhead costs which are paid for the test to be performed. It is not a part of Direct costs incurred in production process of tents. The expert is to be paid $ 80,000 whether there is a production of 20,000 Tenst or nor so it is a cost which is to be allocated among the different month on the basis of their production. So by this it is clear if the objective is to find the cost per tent which in other words is to allocate the cost of expert salary on the Tenst Produced is itself in the nature of Indirect Cost which is to be determined on per tent basis.

Question D

Cost per Tent = Total Quality Control Cost for Expert / Total Tent estimated to produce

Total Quality Control Costs for Expert = $ 80,000

Total Tents estimated to be produced = 20,000 Tents

Cost per Tent = 80,000 / 20,000

Cost per Tent = $ 4 per Tent Tested

Cost Allocated for January = Tents Produced during January * Cost per Tent

Cost Allocated for January = 1,600 Tents * $ 4 per Tent = $ 6,400

Costs Allocated for February = Tents Produced during February * Cost per Tent

Cost Allocated for February = 1,200 Tenst * $ 4 per Tent = $ 4,800