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 109,000 units of the Sport model and 44,500 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 34 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Activity Assembly building Assembling Setting up machines Handling material Packaging building Inspecting and packing Shipping Direct material Direct labor Assembly Packaging Cost Driver Machine-hours Setup hours Production runs Total direct labor Direct labor-hours Number of shipments Cost Driver Volume Pro Direct costs Overhead Assembly building Assembling (@ $30 per MH) Setting up machine (3 $900 per setup hour) wwwda 76 44 ARA Sport 6,900 49 17 63, 600 109 30, 900 490 49 Third Quarter Unit Cost Report. Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,509,000 24,600 218 $ 759,000 999,000 $1,758, 000 $3, 267,000 Total 37,800 539 66 $207,000 44,180 PA Ann 88, 200 327 Pro $2,418,000 $ 618,000 378,000 $ 996,000 $3,414, 000 $ 927,000 441,000 Ann
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 109,000 units of the Sport model and 44,500 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 34 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Activity Assembly building Assembling Setting up machines Handling material Packaging building Inspecting and packing Shipping Direct material Direct labor Assembly Packaging Cost Driver Machine-hours Setup hours Production runs Total direct labor Direct labor-hours Number of shipments Cost Driver Volume Pro Direct costs Overhead Assembly building Assembling (@ $30 per MH) Setting up machine (3 $900 per setup hour) wwwda 76 44 ARA Sport 6,900 49 17 63, 600 109 30, 900 490 49 Third Quarter Unit Cost Report. Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,509,000 24,600 218 $ 759,000 999,000 $1,758, 000 $3, 267,000 Total 37,800 539 66 $207,000 44,180 PA Ann 88, 200 327 Pro $2,418,000 $ 618,000 378,000 $ 996,000 $3,414, 000 $ 927,000 441,000 Ann
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter15: Lean Accounting And Productivity Measurement
Section: Chapter Questions
Problem 1CE: Anderson Company has the following departmental manufacturing structure for one of its products:...
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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 109,000 units of the Sport model and 44,500 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 34 percent.
Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility
Activity
Assembly building
Assembling
Setting up machines
Handling material
Packaging building
Inspecting and packing:
Shipping
Direct material
Direct labor
Assembly
Packaging.
Total direct labor.
Direct costs
Overhead
Assembly building
Cost Driver
SAREEFFSENEGER
Machine-hour's
Setup hours
Production runs
20
Direct labor-hours.
Number of shipments
Assembling (@S30 per MH)
Setting up machine ( $900 per setup hour)
IG
ARA
Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility
Sport
$1,509,000
gi
S
W
Cost Driver Volume
Pro
Sport
6,900
49
17
63,600
189
< Prev
30, 900
490
49
24,600
218
$ 759,000
999,000
$1,758,000
$3, 267,000
$ 207,000
44,180
3 of 18
Ann
Total
37,800
539
66
www
88, 200
327
Pro
$2,418,000
$ 618,000
378,000
$ 996,000
$3,414, 000
$ 927,000
441,000
L2
Ann
Next >
Transcribed Image Text:Packaging building
Inspecting and packing Direct labor-hours
Shipping
Number of shipments
Direct material
Direct labor
Assembly
Packaging
Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility
Sport
$1,509,000
Total direct labor
Direct costs
Overhead
Assembly building
Assembling (@ $30 per MH)
Setting up machine (@ $900 per setup hour)
Handling material (@ $3,000 per run)
63, 600
109
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
24, 600
218
759, 000
999,000
$1,758,000
$3,267,000
$207,000
44, 100
51,000
$
318,000.
143, 880
763,980
$4,030, 980
109,000
36.98
$
88, 200
327
Pro
$2,418,000
$ 618,000
378,000
$ 996,000
$3,414,000
$927,000
441, 000
147,000
123, 000
287, 760
$1,925, 760
$5,339, 760
44,500
$ 119.99
Required:
a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costin
Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume
a setup hour remains at $900.
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