# Chapter 5 HW Problems

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Problem 5-33
First-stage allocation, activity-based costing, manufacturing sector
Wages & Salaries
Depreciation
Rent
Other O/H
Total O/H Cost

\$

\$

Direct Mfg.
Labor Support
Wages & Salaries
\$
192,000
Depreciation
15,000
Rent
36,000
Other O/H
48,000
Total O/H Cost
\$
291,000
Activity Rate \$
9.70
\$
9.70
Order 448200:
Direct Mfg. Labor
Order Process
Design Support
Other
Direct Materials
Direct Labor
Direct labor rate/hour

Activity Cost Pool
Drct Mfg. Labor
Order Process
Design Support
Other

480,000
60,000
120,000
240,000
900,000

Order
Processing
\$ 120,000 \$
6,000
30,000
72,000
\$ 228,000 \$
\$
456 \$
8
Costs

80
1
1
80
4550
80
20 \$

776
456
2,490
352
4,550
1,600
10,224

Activity Measure
# of Drct Mfg. Labor Hours
#
The gross margin percentage calculated that Mom-and-Pop stores would provide more profit. However, by using the ABC method to analyze and allocate "other operating costs" to each of the market segments the outcome generates a different profitability for each segment. The ABC method show Mom-and-Pop segment genereating the lowest profit of each of the segments. While General Supermarket stores provide over five times the profit then the Mom-and-Pop segment. 3

Problem 5-37
Choosing cost drivers, activity-based costing, activity-based management
Heirarchy
Unit
Unit
Unit
Unit
Batch
Batch
Product
Facility

DM - Purses
DM - Backpacks
DML - Purses
DML -Backpacks
Setup
Shipping
Design

DM - Backpacks
DM - Purses
DML -Backpacks
DML - Purses
Setup
Shipping
Design
Total

Number of bags
Hours of production
Number of batches
Number of designs

\$

454,995
319,155
113,000
99,000
64,000
73,000
169,000
221,000
\$ 1,513,150
Backpacks
6,175
1,665
120
2

Cost Driver
# of bags
# of bags
# of bags
# of bags
# of batches
# of batches
# of designs
Hrs of prod.

Cost increases with each additiional unit produced.
Cost increases with each additiional unit