Line and Staff Authority Fidelity Leasing Company (FLC) leases office equipment to a variety of customers. The company’s organization chart is shown on the following page. The responsibilities of the four positions in blue in the chart are:
● J. P. Chen, assistant controller—special projects. Chen works on projects assigned to him by the controller. The most recent project was to design a new accounts payable system.
● Betty Hodge, leasing contracts manager. Hodge coordinates and implements leasing transactions. Her department handles all transactions after the sales department gets a signed contract. This includes requisitioning equipment from the purchasing department, maintaining appropriate insurance, delivering equipment, issuing billing statements, and seeking renewal of leases. a) Depreciation on factory equipment.
(b) Depreciation on office equipment.
(c) Depreciation on factory building.
(d) Advertising manager’s salary.
(e) Assembly foreman’s salary.
(f) Salespersons’ salaries.
(g) Salespersons’ travel expenses.
(h) Supplies for the Machining Department.
(i) Advertising supplies used.
(j) Electricity for the Assembly Department.
(k) Lost materials (scrap) in a Machining Department.
(l) Direct labor in the Assembly Department.
(m) Supplies for the sales office.
(n) Sales commissions.
(o) Packing supplies.
(p) Cost of hiring new employees.
(q) Payroll fringe benefits for workers in the Shipping Department.
(r) Supplies for Production Scheduling.
(s) Cost of repairing parts improperly manufactured in the Machining Department.
(t) Paint for the Assembly Department.
(u) Heat, light, and power for the factory.
(v) Leasing of computer equipment for the Accounting Department.
Specify an appropriate cost driver for tracing costs associated with the various levels of activities to the next cost objective or products, whichever is appropriate
BUS 630 Case 5A Glaser Health Products
1. Identify each of the costs with the appropriate division: Operations, Sales, Administrative.
2. Identify each of the costs with one of the following:
(a) Unit-level activities. (c) Product-level activities.
(b) Batch-level activities. (d) Facility-level activities.
Organize these classifications by division: Operations, Sales, Administrative.
3. Specify an appropriate cost driver for tracing costs associated with the various levels of activities to the next cost objective or products, whichever is appropriate.
4. Glaser Health Products is interested in using activity-based costing to identify as many costs as possible with the products. These costs will be used for planning and control decisions rather than for inventory valuation. The controller decided that all operation costs will be related to products but only those sales and administrative costs that are classified as unit-level, batch-level, or product-level costs
should be related to products. Using preliminary stage cost drivers, explain how individual items of costs will be traced to activity groupings.
5. Using primary stage cost drivers, show how the costs should be related to products.
6. Explain why it is necessary to use preliminary stage and primary stage cost drivers
● Larry Paperman, chief accountant. Paperman supervises all the accounting functions. He produces reports for the four supervisors in the functional areas.
● Dawn Shevlin, director of human resources. Shevlin works with all departments of FLC in hiring personnel. Her department advertises all positions and screens candidates, but the individual departments conduct interviews and make hiring decisions. Shevlin also coordinates employee evaluations and administers the company’s salary schedule and fringe benefit program.
1. Distinguish between line and staff positions in an organization and discuss why conflicts might arise between line and staff managers.
2. For each of the four managers described, identify whether their position is a line or staff position and explain why you classified it that way. Also, indicate any potential conflicts that might arise with other managers in the organization.
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