5-29 Activity-based costing. The job-costing system at Melody's Custom Framing has five indirect cost pools (purchasing, material handling, machine maintenance, product inspection, and packaging). The company is in the process of bidding on two jobs: Job 220, an order of 17 intricate personalized frames, and Job 330, an order of 5 standard personalized frames. The controller wants you to compare overhead allocated under the current simple job-costing system and a newly designed activity-based job-costing system. Total budgeted costs in each indirect-cost pool and the budgeted quantity of activity driver are as follows. Budgeted Quantity of Activity Driver 1,500 TET Budgeted Overhead Activity Driver Purchase orders processed $ 28,500 Purchasing Material handling Machine maintenance Product inspection Packaging 47,700 Material moves 5,300 100,000 Machine-hours 10,000 6,800 Inspections Units produced 1,700 13,200 3,300 $196,200 Ieformation related to Job 220 and Job 330 follows. Job 220 incurs more batch-level costs because it uses more types of materials that need to be purchased, moved, and inspected relative to Job 330. Job 220 Job 330 Number of purchase orders Number of material moves 21 6. 18 Machine-hours 30 70 2. Number of inspections Units produced 10 17 1. Compute the total overhead allocated to each job under a simple costing system, where overhead is allocated based on machine-hours. 2. Compute the total overhead allocated to each job under an activity-based costing system using the

Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter18: Activity-based Costing
Section: Chapter Questions
Problem 3CMA: Young Company is beginning operations and is considering three alternatives to allocate...
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xterior door?
job-costing system. Total budgeted costs in each indirect-cost pool and the budgeted quantity of activity
The company is in the process of bidding on two jobs: Job 220, an order of 17 intricate personalized
overhead allocated under the current simple job-costing system and a newly designed activity-based
frames, and Job 330, an order of 5 standard personalized frames. The controller wants you to compare
5-29 Activity-based costing. The job-costing system at Melody's Custom Framing has five indirect
cost pools (purchasing, material handling, machine maintenance, product inspection, and packaging).
goods, milk and fruit juice, and frozen foods. It
upermarkets (FS) operates at capacity and de-
nformation from its activity-based costing system
Fes that account for the store support costs,
rs?
vs:
driver are as follows.
$95 per purchase order
$76 per delivery
$19 per hour
S 0.15 per item sold
Budgeted Quantity of
Activity Driver
TET
Budgeted Overhead
Activity Driver
Purchase orders processed
$ 28,500
Purchasing
Material handling
Machine maintenance
Product inspection
1,500
47,700
Material moves
5,300
100,000
Machine-hours
"s:
10,000
20 6,800
13,200 0
Inspections
Units produced
Vino
1,700
Milk and Fruit Juice
Frozen Products
Packaging
3,300
noue
$196,200
$66,500
$50,500
Information related to Job 220 and Job 330 follows. Job 220 incurs more batch-level costs because it uses
more types of materials that need to be purchased, moved, and inspected relative to Job 330.
$51,000
$32,000
$15,300
$ 9,600
24
14
Job 220
Job 330
60
36
Number of purchase orders
21
Number of material moves
18
150
20
Machine-hours
asto19
0012
20,200
7,960
30
70
Number of inspections
10
2
ucts at the rate of 30% of cost of goods
Units produced
17
1. Compute the total overhead allocated to each job under a simple costing system, where overhead is
Required
bility report for FS.
t for FS.
e to FS managers?
allocated based on machine-hours.
2. Compute the total overhead allocated to each job under an activity-based costing system using the
appropriate activity drivers.
3. Explain why Melody's Custom Framing might favor the ABC job-costing system over the simple job-
çosting system, especially in its bidding process.
operates at capacity and sells furni-
u ABC to deter-
- Ordinary
Transcribed Image Text:xterior door? job-costing system. Total budgeted costs in each indirect-cost pool and the budgeted quantity of activity The company is in the process of bidding on two jobs: Job 220, an order of 17 intricate personalized overhead allocated under the current simple job-costing system and a newly designed activity-based frames, and Job 330, an order of 5 standard personalized frames. The controller wants you to compare 5-29 Activity-based costing. The job-costing system at Melody's Custom Framing has five indirect cost pools (purchasing, material handling, machine maintenance, product inspection, and packaging). goods, milk and fruit juice, and frozen foods. It upermarkets (FS) operates at capacity and de- nformation from its activity-based costing system Fes that account for the store support costs, rs? vs: driver are as follows. $95 per purchase order $76 per delivery $19 per hour S 0.15 per item sold Budgeted Quantity of Activity Driver TET Budgeted Overhead Activity Driver Purchase orders processed $ 28,500 Purchasing Material handling Machine maintenance Product inspection 1,500 47,700 Material moves 5,300 100,000 Machine-hours "s: 10,000 20 6,800 13,200 0 Inspections Units produced Vino 1,700 Milk and Fruit Juice Frozen Products Packaging 3,300 noue $196,200 $66,500 $50,500 Information related to Job 220 and Job 330 follows. Job 220 incurs more batch-level costs because it uses more types of materials that need to be purchased, moved, and inspected relative to Job 330. $51,000 $32,000 $15,300 $ 9,600 24 14 Job 220 Job 330 60 36 Number of purchase orders 21 Number of material moves 18 150 20 Machine-hours asto19 0012 20,200 7,960 30 70 Number of inspections 10 2 ucts at the rate of 30% of cost of goods Units produced 17 1. Compute the total overhead allocated to each job under a simple costing system, where overhead is Required bility report for FS. t for FS. e to FS managers? allocated based on machine-hours. 2. Compute the total overhead allocated to each job under an activity-based costing system using the appropriate activity drivers. 3. Explain why Melody's Custom Framing might favor the ABC job-costing system over the simple job- çosting system, especially in its bidding process. operates at capacity and sells furni- u ABC to deter- - Ordinary
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