kk.Subject :- Accounting Required InformationProblem 5-57 Activity-Based Costing; Activity Cost Pools; Pool Rates; Calculation of Product Costs; CostDistortion (LO 5-1, 5-2,5-3,5-4, 5-5)[The following information applies to the questions displayed below.]Knickknack, Inc., manufactures two products: Odds and Ends. The firm uses a single, plantwide overhead rate based ondirect-labor hours. Production and product-costing data are as follows:Production quantityDirect materialDirect labor (not including setup time)Manufacturing overheadTotal cost per unitManufacturing overhead budget:Machine-related costsSetup and inspectionEngineeringPlant-related costsTotalPredetermined overhead rate:Budgeted manufacturing overheadBudgeted direct-labor hoursActivity Cost PoolMachine-related costsSetup and inspectionEngineeringPlant-related costsOdds1,000 units$ 40Cost Driver$30 (2 hr. at $15)96 (2 hr. at $48)166$450,000180,00090,00096,000$816,000$816,000(1,000) (2) + (5,000) (3)Machine hoursNumber of production runsEngineering change ordersSquare footage of space.Ends5,000 units$ 60Knickknack, Inc., prices its products at 120 percent of cost, which yields target prices of $199.20 for Odds and $298.80 forEnds. Recently, however, Knickknack has been challenged in the market for Ends by a European competitor, BricabracCorporation. A new entrant in this market, Bricabrac has been selling Ends for $220 each. Knickknack's president ispuzzled by Bricabrac's ability to sell Ends at such a low cost. She has asked you (the controller) to look into the matter. Youhave decided that Knickknack's traditional, volume-based product-costing system may be causing cost distortion betweenthe firm's two products. Ends are a high-volume, relatively simple product. Odds, on the other hand, are quite complex andexhibit a much lower volume. As a result, you have begun work on an activity-based costing system.$9,000 hr.= $48 per direct-labor hourBudgeted Level ofCost Driver45 (3 hr. at $15)144 (3 hr. at $48)24940 runs100 change orders1,920 sq. ft.You have gathered the following additional Information:• Each odd requires 4 machine hours, whereas each end requires 1 machine hour.Odds are manufactured in production runs of 50 units each. Ends are manufactured in 250-unit batches.Three-quarters of the engineering activity, as measured in terms of change orders, is related to Odds.The plant has 1,920 square feet of space, 80 percent of which is used in the production of Odds. Problem 5-57 Part 77. Calculate the total amount of product cost distortion for entire product line caused by Knickknack's traditional, volume-based costingsystem. (Round your Intermediate calculations to 2 decimal places. Negative amount should be indicated by a minus sign.)Total amount of cost distortionOddsEnds

Name: kk.Subject :- Accounting Required InformationProblem 5-57 Activity-Bas
Uploaded: 2024-03-20T06:32:49.000Z
Channel: Bartleby
Description: kk.Subject :- Accounting Required InformationProblem 5-57 Activity-Based Costing; Activity Cost Pools; Pool Rates; Calculation of Product Costs; CostDistortion (LO 5-1, 5-2,5-3,5-4, 5-5)[The following information applies to the questions displayed be

ABC costing, also known as Activity-Based Costing, is a method of cost accounting that allocates…

Business

Accounting

7. Calculate the total amount of product cost distortion for entire product line caused by Knickknack's traditional, volume-based costing system. (Round your Intermediate calculations to 2 decimal places. Negative amount should be Indicated by a minus sign.) Total amount of cost distortion Odds Ends

7. Calculate the total amount of product cost distortion for entire product line caused by Knickknack's traditional, volume-based costing system. (Round your Intermediate calculations to 2 decimal places. Negative amount should be Indicated by a minus sign.) Total amount of cost distortion Odds Ends

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 3PB: Activity-based department rate product costing and product cost distortions Big Sound Inc....

See similar textbooks

Similar questions

(Appendix 3A) Separating Fixed and Variable Costs, Service Setting Louise McDermott, controller for the Galvin plant of Veromar Inc., wanted to determine the cost behavior of moving materials throughout the plant. She accumulated the following data on the number of moves (from 100 to 800 in increments of 100) and the total cost of moving materials at those levels of moves: Required: 1. Prepare a scattergraph based on these data. Use cost for the vertical axis and number of moves for the horizontal axis. Based on an examination of the scattergraph, does there appear to be a linear relationship between the total cost of moving materials and the number of moves? 2. Compute the cost formula for moving materials by using the high-low method. Calculate the predicted cost for a month with 550 moves by using the high-low formula. (Note: Round the answer for the variable rate to three decimal places and the answer for total fixed cost and total cost to the nearest dollar.) 3. CONCEPTUAL CONNECTION Compute the cost formula for moving materials using the method of least squares. (Note: For the method of least squares, round the variable rate to two decimal places and total fixed cost and total cost to the nearest dollar.) Using the regression cost formula, what is the predicted cost for a month with 550 moves? What does the coefficient of determination tell you about the cost formula computed by regression? 4. CONCEPTUAL CONNECTION Evaluate the cost formula using the least squares coefficients. Could it be improved? Try dropping the third data point (300, 3,400), and rerun the regression.
FIFO Method, Single Department Analysis, One Cost Category Refer to the data in Problem 6.33. Required: Prepare a cost of production report for the Fabrication Department for December using the FIFO method of costing.
Refer to the data in Exercise 7.20. The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Allocate the overhead costs to the producing departments using the sequential method. (Take allocation ratios out to four significant digits. Round allocated costs to the nearest dollar.) 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)
Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating support service costs by switching to the direct method. Required: 1. Allocate the costs of the support departments to the producing departments using the direct method. (Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar.) 2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.)
Use the following information for Brief Exercises 4-27 and 4-28: Quillen Company manufactures a product in a factory that has two producing departments, Cutting and Sewing, and two support departments, S1 and S2. The activity driver for S1 is number of employees, and the activity driver for S2 is number of maintenance hours. The following data pertain to Quillen: Brief Exercises 4-27 (Appendix 4B) Assigning Support Department Costs by Using the Direct Method Refer to the information for Quillen Company above. Required: 1. Calculate the cost assignment ratios to be used under the direct method for Departments S1 and S2. (Note: Each support department will have two ratiosone for Cutting and the other for Sewing.) 2. Allocate the support department costs to the producing departments by using the direct method.
Lampierre makes brass and gold frames. The company computed this information to decide whether to switch from the traditional allocation method to ABC: The estimated overhead for the material cost pool is estimated as $12,500, and the estimate for the machine setup pool is $35,000. Calculate the allocation rate per unit of brass and per unit of gold using: A. The traditional allocation method B. The activity-based costing method
Activity-based costing and product cost distortion The management of Four Finger Appliance Company in Exercise 14 has asked you to use activity-based costing instead of direct labor hours to allocate factory overhead costs to the two products. You have determined that 81,000 of factory overhead from each of the production departments can be associated with setup activity (162,000 in total). Company records indicate that blenders required 135 setups, while the toaster ovens required only 45 setups. Each product has a production volume of 7,500 units. Determine the three activity rates (assembly, test and pack, and setup). Determine the total factory overhead and factory overhead per unit allocated to each product using the activity rates in (A).
Crafts 4 All has these costs associated with production of 12,000 units of accessory products: direct materials, $19; direct labor, $30; variable manufacturing overhead, $15; total fixed manufacturing overhead, $450,000. What is the cost per unit under both the variable and absorption methods?
Use the following information for Brief Exercises 4-34 and 4-35: Sanjay Company manufactures a product in a factory that has two producing departments, Assembly and Painting, and two support departments, S1 and S2. The activity driver for S1 is square footage, and the activity driver for S2 is number of machine hours. The following data pertain to Sanjay: Brief Exercises 4-34 (Appendix 4B) Assigning Support Department Costs by Using the Direct Method Refer to the information for Sanjay Company above. Required: 1. Calculate the cost assignment ratios to be used under the direct method for Departments S1 and S2. (Note: Each support department will have two ratiosone for Assembly and the other for Painting.) 2. Allocate the support department costs to the producing departments by using the direct method.
Journalizing the distribution of service department costs to production departments Required: Using your solution to P4-7, prepare journal entries for the following: The distribution of the total factory overhead of $79,400 to the individual production and service departments where it originated. The distribution of the Building Maintenance overhead to the appropriate other departments. The distribution of the Factory Office overhead to the appropriate other departments.
Activity-based department rate product costing and product cost distortions Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: The activity-base usage quantities and units produced for the two products follow: Instructions Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is 420,000 and 294,000 for the Subassembly and Final Assembly departments, respectively. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Determine the total and per-unit cost assigned to each product under activity-based costing. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods. production department factory overhead rate and activity-based costing methods.
Cost Flows Consider the following independent jobs. Overhead is applied in Department 1 at the rate of 6 per direct labor hour. Overhead is applied in Department 2 at the rate of 8 per machine hour. Direct labor wages average 10 per hour in each department. Required: Fill in the missing data for each job.