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After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 112,000 units of the Sport model and 46,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by one-third. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Activity Cost Driver Pro Sport Assembly building Assembling Direct material Direct labor Assembly Packaging Total direct labor Machine-hours Setup hours Direct costs Cost Driver Volume Total Production runs Setting up machines Handling material Packaging building Inspecting and packing Direct labor-hours Shipping Number of shipments Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Pro $ 2,424,000 7,200 52 20 64,800 31,200 112 520 52 25,200 224 Sport $ 1,512,000 38,400 $ 762,000 1,002,000 $ 1,764,000 $ 3,276,000 572 72 90,000 336 $ 624,000 384,000 $ 1,008,000 $ 3,432,000

After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 112,000 units of the Sport model and 46,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by one-third. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Activity Cost Driver Pro Sport Assembly building Assembling Direct material Direct labor Assembly Packaging Total direct labor Machine-hours Setup hours Direct costs Cost Driver Volume Total Production runs Setting up machines Handling material Packaging building Inspecting and packing Direct labor-hours Shipping Number of shipments Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Pro $ 2,424,000 7,200 52 20 64,800 31,200 112 520 52 25,200 224 Sport $ 1,512,000 38,400 $ 762,000 1,002,000 $ 1,764,000 $ 3,276,000 572 72 90,000 336 $ 624,000 384,000 $ 1,008,000 $ 3,432,000

Financial And Managerial Accounting
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter18: Activity-based Costing
Section: Chapter Questions
Problem 13E: Handbrain Inc. is considering a change to activity-based product costing. The company produces two...
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After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 112,000 units of the Sport model and 46,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by one-third. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Activity Cost Driver Pro Sport Assembly building Assembling Machine-hours Setup hours Production runs Direct material Direct labor Assembly Packaging Total direct labor Cost Driver Volume Total Direct costs Overhead Assembly building Assembling (@ $30 per MH) Setting up machines (@ $900 per setup hour) Handling material (@ $3,000 per run) Packaging building Inspecting and packing (@ $5 per direct labor-hour) Shipping (@ $1,320 per shipment) Total ABC overhead Total ABC cost Number of units Unit cost 7,200 52 Setting up machines Handling material Packaging building Inspecting and packing Direct labor-hours Shipping Number of shipments Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Pro $ 2,424,000 20 64,800 31,200 112 520 52 25,200 224 Sport $ 1,512,000 $ 762,000 1,002,000 $ 1,764,000 $ 3,276,000 $ 216,000 46,800 60,000 324,000 147,840 $ 794,640 $ 4,070,640 38,400 112,000 $36.35 572 72 90,000 336 $ 624,000 384,000 $ 1,008,000 $ 3,432,000 $ 936,000 468,000 156,000 126,000 295,680 $ 1,981,680 $5,413,680 46,000 $ 117.69 Required: Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900. Sport = Pro =
Transcribed Image Text:After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 112,000 units of the Sport model and 46,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by one-third. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Activity Cost Driver Pro Sport Assembly building Assembling Machine-hours Setup hours Production runs Direct material Direct labor Assembly Packaging Total direct labor Cost Driver Volume Total Direct costs Overhead Assembly building Assembling (@ $30 per MH) Setting up machines (@ $900 per setup hour) Handling material (@ $3,000 per run) Packaging building Inspecting and packing (@ $5 per direct labor-hour) Shipping (@ $1,320 per shipment) Total ABC overhead Total ABC cost Number of units Unit cost 7,200 52 Setting up machines Handling material Packaging building Inspecting and packing Direct labor-hours Shipping Number of shipments Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Pro $ 2,424,000 20 64,800 31,200 112 520 52 25,200 224 Sport $ 1,512,000 $ 762,000 1,002,000 $ 1,764,000 $ 3,276,000 $ 216,000 46,800 60,000 324,000 147,840 $ 794,640 $ 4,070,640 38,400 112,000 $36.35 572 72 90,000 336 $ 624,000 384,000 $ 1,008,000 $ 3,432,000 $ 936,000 468,000 156,000 126,000 295,680 $ 1,981,680 $5,413,680 46,000 $ 117.69 Required: Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900. Sport = Pro =
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