Required: 1 Calculate the material handling rate that would have been used by Eloise Smith’s predecessor at East
Coast Marine.
2 Calculate the revised material handling costs to be allocated on a per purchase order basis.
3 Discuss why purchase orders might be a more reliable cost driver than the dollar amount of direct
material.
4 Calculate the difference due to the change to the new method of allocating material handling costs to
government contracts.
5 Prepare a forecast of the cumulative dollar impact over a three-year period (based on the coming year
plus 2 more years) of Eloise Smith’s recommended change for allocating Material Handling Department
costs to the Government Contracts Unit. Round all calculations to the nearest whole number.
6 Referring to the standards of ethical conduct for accountants described in Chapter 1:
(a) Discuss why Eloise Smith has an ethical conflict.
(b) Identify several steps that Smith could take to resolve the ethical conflict.

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