East Coast Marine Ltd (ECM) manufactures parts for small marine craft

East Coast Marine Ltd

East Coast Marine Ltd (ECM) manufactures parts for small marine craft. Over the past decade, ECM’s management has met its goal of reducing its reliance on government contract work to 50 per cent of total sales. ECM is now equally reliant on commercial sales and government contracts.Traditionally, the costs of the Material Handling Department have been allocated to direct material as a percentage of direct material dollar value. This was adequate when the majority of the manufacturing was homogeneous and related to government contracts. Recently, however, government auditors have rejected some proposals, stating that‘the amount of Material Handling Department costs allocated to these proposals is disproportionate to the total effortinvolved’.Eloise Smith, the newly hired cost accounting manager, was asked by the manager of ECM’s GovernmentContracts Unit, Paul Jones, to find a more equitable method of allocating the Material Handling Department coststo the user departments. Her review has revealed the following information:■ The majority of the direct material purchases for government contracts are high-dollar, low-volumepurchases, while commercial materials represent low- dollar, high-volume purchases.■ Administrative departments such as Marketing, Finance and Administration, Human Resources and Maintenance also use the services of the Material Handling Department on a limited basis but have never been charged in the past for material handling costs.■ One purchasing manager with a direct phone line is assigned exclusively to purchasing high-dollar, low volume material for government contracts on an annual salary of $36 000. Employee on-costs are estimated to be 20 per cent of the annual salary. The annual costs of the dedicated phone line…

WRITE THIS ESSAY FOR ME

Tell us about your assignment and we will find the best writer for your paper.

Get Help Now!