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 $ K425 Activity Rates $9 per direct labor-hour $3 per machine-hour $45 per setup $150 per order. $ 130 per shipment $ 875 per product 0 $ Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system? Total Expected Activity K425 M67 2,000 M67 200 1,000 2,800 7 7 14 2 50 40 2 2 2 2

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 $ K425 Activity Rates $9 per direct labor-hour $3 per machine-hour $45 per setup $150 per order. $ 130 per shipment $ 875 per product 0 $ Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system? Total Expected Activity K425 M67 2,000 M67 200 1,000 2,800 7 7 14 2 50 40 2 2 2 2

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 12E: Activity cost pools, activity rates, and product costs using activity-based costing Caldwell Home...

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Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided: aCalculated using number of dies as the single unit-level driver. bCalculated by multiplying the consumption ratio of each product by the cost of each activity. Required: 1. Using the five most expensive activities, calculate the overhead cost assigned to each product. Assume that the costs of the other activities are assigned in proportion to the cost of the five activities. 2. Calculate the error relative to the fully specified ABC product cost and comment on the outcome. 3. What if activities 1, 2, 5, and 8 each had a cost of 650,000 and the remaining activities had a cost of 50,000? Calculate the cost assigned to Wafer A by a fully specified ABC system and then by an approximately relevant ABC approach. Comment on the implications for the approximately relevant approach.
Rex Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are: Compute the overhead rate for each activity.
Scattergraph method Using the data in P4-2 and a piece of graph paper: 1. Plot the data points on the graph and draw a line by visual inspection, indicating the trend shown by the data points. 2. Determine the variable cost per unit and the total fixed cost from the information on the graph. 3. Determine the variable cost to be charged to the product for the year. 4. Determine the fixed cost to be charged to factory overhead for the year. 5. Do these answers agree with the answers to P4-2? Why or why not?
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.
Rocks Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are: Compute the overhead rate for each activity.
Lonsdale Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows: Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow: a. Determine the activity rate for each activity. b. Use the activity rates in (a) to determine the total and per-unit activity costs associated with each product. Round to the nearest cent.
Overhead costs are assigned to each product based on __________________. A. the proportion of that products use of the cost driver B. a predetermined overhead rate for a single cost driver C. price of the product D. machine hours per product
Using the data in P4-2 and Microsoft Excel: 1. Separate the variable and fixed elements. 2. Determine the cost to be charged to the product for the year. 3. Determine the cost to be charged to factory overhead for the year. 4. Determine the plotted data points using Chart Wizard. 5. Determine R2. 6. How do these solutions compare to the solutions in P4-2 and P4-3? 7. What does R2 tell you about this cost model?
Larsen, Inc., produces two types of electronic parts and has provided the following data: There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plantwide rate? Which product is undercosted? 3. What if the machine hours were used for the plantwide rate? Would this remove the cost distortion of a plantwide rate?
Required information [The following information applies to the questions displayed below.] Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company's five activity cost pools: Activity Cost Pool Labor-related Purchase orders Product testing Template etching General factory Activity Cost Pool Labor-related (DLHS) Activity Measure Product A Product B Product C Product D Direct labor-hours Number of orders Number of tests Number of templates Machine-hours Total Overhead Cost Expected Overhead Cost $ 30,115 $ 2,320 $ 6,930 $ 870 $ 65,100 2. The expected activity for the year was distributed among the company's four products as follows: Product A 625 30 190 Expected Activity 1,585 DLHS Product B 160 Purchase orders (orders) 190 Product testing (tests) 55 Template etching (templates) 17 3 General factory (MHS) 3,600 1,700 2,300 Using the ABC data, determine the total amount…
Activity Levels and Cost Drivers Shroeder Machine Shop has the following activities: Machine operation Machine setup Production scheduling Materials receiving Research and development Machine maintenance Product design Parts administration Final inspection of a sample of products Materials handling Required Classify each of the activities as a unit-level, batch-level, product-level, or facility-level activity. Identify a potential cost driver for each activity in requirement 1.
Consumption Ratios; Activity RatesSaludable Company produces two types of get-well cards: scented andregular. Drivers for the four activities are as follows: ScentedCards RegularCards Inspection hoursSetup hoursMachine hoursNumber of moves 1,0804209602.880 7201802,880720 The following activity data have been collected: Inspecting productsSetting up equipmentMachiningMoving materials $45,00028,50030,72016,200 Required:1. Calculate the consumption ratios for the four drivers (round totwo decimal places).2. CONCEPTUAL CONNECTION Is there evidence of productdiversity? Explain the significance of product diversity for decisionmaking if the company chooses to use machine hours to assign all overhead.3. Calculate the activity rates that would be used to assign costs toeach product (round to two decimal places).4. Suppose that the activity rate for inspecting products is $20 perinspection hour. How many hours of inspection are expected forthe coming year?