ACCT 2521 Class Handout Week 5 Wed

Activity Cost Pool Cost Driver EstimatedOverhead Use perProduct A Use perProduct B Machine Setups Setups $144,000 6,000 2,000 Assembly Number of Parts 71,000 25,000 46,000 Machine Maintenance Machine Hours 200,000 13,000 37,000 Compare the overhead allocation using (A) the traditional allocation method and (B) the activity-based costing method. (Hint: the traditional method uses machine hours as the allocation base.) For those boxes in which you must enter subtractive or negative numbers use a minus sign.

Freda Company Manufacturing 2 products d and f.

Exercise 7-4 (Algo) Second-Stage Allocation [LO7-4] Klumper Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Machine processing Machine setups Number of units produced per year Direct labor-hours Activity Rate $ 11 per direct labor-hour $5 per machine-hour $ 45 Production orders Shipments $ 120 per shipment Product sustaining $ 900 per product Activity data have been supplied for the following two products: Machine-hours Machine setups Production orders Shipments Product sustaining per setup $ 160 per order Total Expected Activity K425 M67 2,000 200 1,025 2,600 7 7 14 3 50 40 3 3 3 3 Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?

Ans

Activity – cost drivers 16,000 hours reme Manufacturing Company provides the following ABC costing information: Total Costs ctivities Account inquiry $320,000 $90,000 6,000,000 lines 80,000 accounts $174,000 Account billing Account verification accounts 5,000 letters $36,250 Correspondence letters $620,250 Total costs The above activities are used by Departments A and B as follows: Department B Department A 2.200 hours 3,700 hours Account inquiry hours Account billing Vines 900.000 lines 750,000 lines 3,000 accounts 5,000 accounts Account verification accounts 2,100 letters 1,700 letters Correspondence letters How much of the account billing cost will be assigned to Department B? O A. $90,000 O B. $11,250 OC. S45,000 O D. $13,500 O Time Remaining: 02:27:15 Pro esc @ 23 24 4. & * 2 3. 7. 8 9. Q E R tab

Activities and Activity Measures Expected Activity Estimated Overhead Costs Product 1 Product 2 Hand-processing (direct labor-hours) $ 320,000 45,000 55,000 Setting up equipment (number of setups) 150,000 9,000 21,000 Administering parts inventories (number of part types)  30,000 110 90   $ 500,000       Transformation Corporation has provided the information set forth above regarding the overhead to be allocated between the two products it produces: CDE and EFG. What is the activity rate for the hand-processing units activity?   multiple choice $3.20 per setup Incorrect $5.00 per setup $150.00 per part-type $3.20 per direct labor-hour

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Activity Cost Pool Machining Machine setups Product design Multiple Choice O $205,000 Activity Reasure Machine-hours Number of setups Number of products Using the ABC system, how much overhead cost would be assigned from the Machining cost pool to Pro $198,000 $225,000 $249,000 80 Activity Reasure Machine-hours Number of setups Number of products F3 Product A 9,000 50 1 Product B 6,000 150 1 888 Cost $ 300,000 $ 150,000 $ 78,000 F4 Expected Activity 12,000 01 200 Setups 2 Products < Prev Cenerente. 5 of 3

Activity Cost Pool Supporting direct labor Machine processing Machine setups Production orders Shipments Product sustaining Activity data have been supplied for the following two products: Number of units produced per year Direct labor-hours Machine-hours Machine setups Production orders Shipments Product sustaining Activity Cost Pool Supporting direct labor Machine processing Machine setups Production orders Shipments Product sustaining Total overhead cost Activity Rates $9 per direct labor-hour $3 per machine-hour $45 per setup $150 per order $ 130 per shipment $ 875 per product K425 0 $ Total Expected Activity K425 M67 2,000 M67 200 1,000 2,800 Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system? 0 7 7 14 2 50 40 2 NNNN 2

6 Diamond Company uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system: Costs:   Manufacturing overhead $340,000 Selling and administrative expenses 250,000 Total $590,000 Distribution of Resource Consumption: Activity Cost Pools   Order Size Customer Support Other Total Manufacturing overhead 25% 50% 25% 100% Selling and administrative expenses 60% 30% 10% 100%   The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools. How much cost, in total, would be allocated in the first-stage allocation to the Order Size activity cost pool?   Select one: a. $150,000 b. $360,000 c. $255,000 d. $235,000

Equivalent Units of Production and Related Costs The charges to Work in Process—Assembly Department for a period, together with information concerning production, are as follows. All direct materials are placed in process at the beginning of production. Work in Process—Assembly Department Bal., 9,000 units, 40% completed 72,360 To Finished Goods, 41,500 units ? Direct materials, 40,000 units @ $6.80 272,000     Direct labor 80,000     Factory overhead 40,450     Bal., ? units, 30% completed ?     Determine the following: a.  The number of units in work in process inventory at the end of the period. b.  Equivalent units of production for direct materials and conversion. If an amount is zero or a blank, enter in "0". Work in Process-Assembly Department Equivalent Units of Production for Direct Materials and Conversion Costs     WholeUnits Equivalent UnitsDirect Materials Equivalent UnitsConversion Inventory in process, beginning       Started and…

Equivalent Units of Production and Related Costs The charges to Work in Process—Assembly Department for a period, together with information concerning production, are as follows. All direct materials are placed in process at the beginning of production. Work in Process—Assembly Department Bal., 9,000 units, 40% completed 72,360 To Finished Goods, 41,500 units ? Direct materials, 40,000 units @ $6.80 272,000     Direct labor 80,000     Factory overhead 40,450     Bal., ? units, 30% completed ?     Determine the following: a.  The number of units in work in process inventory at the end of the period.   Feedback   Units in ending work in process represent units that have been started in the department but have not been completed, and therefore have not been transferred out to finished goods. b.  Equivalent units of production for direct materials and conversion. If an amount is zero or a blank, enter in "0". Work in Process-Assembly Department…

Units produced Direct labor-hours used Machine-hours used Direct materials costs Direct labor costs Standard Ultra Total 41,000 13,000 54,000 123,000 20,500 22,500 $ 3,097,000 2,520,000 22,500 $ 3,700,000 855,000 145,500 43,000 $ 6,797,000 3,375,000 The planning process team at Hall, Incorporated has estimated the following manufacturing overhead costs for the next fiscal year: Account Amount Administration Engineering Machine operation and maintenance Miscellaneous Supervision Total $ 825,400 3,603,000 840,000 540,100 884,500 $ 6,693,000 The cost accounting system at Hall, Incorporated calculates product costs by adding allocated overhead to the direct costs of the product. Overhead costs are allocated based on direct labor-hours. Required: a. Compute the estimated per unit product costs for the next fiscal year, based on the current cost accounting system. b. An analyst on the planning process team suggests that a two-stage system would improve the estimated product costs. The…

Cost Pools Machine setup Materials handling Electric power Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours Activity Costs $ 284,000 75,000 26,000 The following cost information pertains to the production of A and B, just two of Hakara's Product A Product B A 5,000 $ 25,000 $ 28,000 Cost per Unit Cost Drivers 100 1,000 2,000 Setup hours Pounds of materials Kilowatt-hours Activity Drive Consumption 4,000 15,000 26,000 B 10,000 $ 33,000 $ 39,000 100 2,000 2,000 Required: 1. Use activity-based costing to determine a unit cost for each product. (Round your final

1. The KLM Company has established the following overhead cost pools and cost drivers. Overhead Cost Pool Machine Material Handling Quality control Packaging Facility Total Material Handling Quality Control Packaging Facility Required: a. S $ $ S S S Estimated Overhead Cost 200,000 150,000 70,000 180,000 dministration Number of inspections 50,000 Number of Units 650,000 Cost Driver 10,000 tons 20 inspections 100 units 800 DLH Machine Hours Weight of raw material Direct Labor Hours .NO:. Estimated Level for Cost Driver 1,000 MH 50,000 tons 2,000 inspections 20,000 units An order for 500 units of product -ordered by Alfa Co.- has the following production requirements. Machine 80 MH 30,000 DLH 16.01.2024 Pool Rates Compute the total overhead cost that should be assigned to the order of Alfa Co., using the five cost pools and drivers. b. What is the overhead cost per unit ordered by Alfa Co? c. Suppose KLM Company were to use a single predetermined overhead rate based on machine hours.…

Expected Cost Setting up equipment Ordering materials $141,000 10,800 87,500 Machining Receiving 25,500 Silven produces two models of cell phones with the following expected activity demands: Model X 5,200 80 200 Units completed Number of setups Number of orders Machine hours Receiving hours Required: Activity Model X Model Y Model X Model Y 5,000 425 Model X Model Y 156,100 108,700 1. Determine the total overhead assigned to each product using the four activity drivers. Total Overhead Assigned $ ✓ Total Overhead Assigned X Model Y Activity Driver Activity Capacity Number of setups Number of orders Machine hours Receiving hours 2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs. Round interim calculations to two decimal places and round your final answers to the nearest dollar. Percentage Error 10,400 % % 40 400…

Production and sales (units) Materials cost ($) Labour cost per unit ($) at $12 per hour Machine hours (per unit) Total no. of production runs Total no. of purchase orders Total no. of deliveries to retail division Market/Retail prices Overhead costs: Machine set-up costs ($) Machine maintenance costs ($) Ordering costs ($) Delivery costs ($) Total ($) Product S Product R 3,200 5,450 117 95 9 1 12 64 80 260 total: 6 2 30 82 64 320 306,435 415,105 11,680 144,400 877,620 Rinse @ $241.69 = full cost +10% oll Retail price Rinse: $260 The company's policy is to transfer the washing machines from the assembly division to the retail division at full cost plus 10% resulting in internal transfer prices, of $220.17 and $241.69 for S and R when transferred to the retail division. The retail division sells S for $320 per machine and R for $260 per machine to the market. (a) Use activity based costing to allocate the overheads and recalculate the transfer prices for S and R. (b) Calculate the…

Estimated indirect manufacturing costs 4, 800, 000 Load base: Machine hours Estimated engine hours: 80,000 Actual indirect manufacturing costs: 4,900,000 Actual engine hours: 75,000 Engine hours according to actual hours for over- or under - allocation were as follows: Actual engine hours: Status 12/31/22 Cost of goods sold: 60, 000 balance 31.12.22 8,000,000 Finished goods: 11,000 balance 31.12.22 1,250,000 Work in progress: 4,000 balance 31.12.22 750,000 calculate the over- or under-allocation of indirect manufacturing costs for 2022

Dengar

Required information Heidelberg Fabrication manufactures two products, G-09 and G-35: Units produced Direct materials cost per unit Machine-hours per unit Production runs per quarter Machine depreciation Setup labor Materials handling Total G-09 19,800 $ 7 4 144 Production at the plant is automated and any labor cost is included in overhead. Data on manufacturing overh plant follow: a. Using current costing system b. Using proposed ABC system G-09 $ 106,920 53,460 42,768 $ 203,148 Required: a. Compute the unit costs for the two products, G-09 and G-35, using the current costing system at Heidelberg (using as the allocation basis). b. Compute the unit costs for the two products, G-09 and G-35, using the proposed ABC system at Heidelberg. Note: For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. G-35 3,960 $19 Unit Cost 7 72 G-35

Units produced Production runs per quarter Direct materials cost per unit Direct labor cost per unit Supervision Setup labor Incoming inspection Total overhead Manufacturing overhead in the plant has three main functions: supervision, setup labor, and Incoming material Inspection. Data on manufacturing overhead for a representative quarter follow: $ 288,750 336,000 241,500 $ 866,250 Standard 14,000 a. Using current costing system b. Using proposed ABC system 50 $30 50 Required: a. Compute the unit costs for the two products, Standard and Premium, using the current costing system at Benton (using direct labor costs as the allocation basis for overhead). b. Compute the unit costs for the two products, Standard and Premium, using the proposed ABC system at Benton. Note: For all requirements, do not round Intermediate calculations. Round your answers to 2 decimal places. S S Answer is complete but not entirely correct. Premium 3,500 25 $64 75 Unit cost Standard 120.00 X S 117.67 X S…

Computing Overhead using Activity Based Costing; Company A: Estimated Annual Overhead: $950,000 Overhead Allocated to Cost Pools: Machine Setups: 22%; Machining: 68%; Inspections: 10%; **Overhead Rate - Round to hundredths Cost Pools Machine Setups Machining # of Setups Machine Hours Cost Drivers Overhead Allocated to Cost Pools Expected Use of Drivers Overhead Rate per Driver 3200 Inspections # of Inspections 50,000 4000 Use of Drivers Use of Drivers Cost Drivers Product A Product B Overhead Allocated to Product A Overhead Allocated to Product B # of Setups 1100 2100 Machine Hours 32,000 # of Inspections 2800 18,000 1200 Total Overhead Applied to Products Units Produced: Product A: 45,000; Product B: 80,000 **Round to nearest hundredth** Overhead Cost per Unit: Product A: Product B: $75.00 DM per unit: $18.50

What is the setup cost per unit of product X under the ABC costing system ?