None Helton Fumiture Corporation has identified activity centers to which overhead costsare assigned. The cost pool amounts for these centers and their sekcted activitydrivers for 2012 are as follows.ActivityCenters CostsActivity DriversUrilities$300,00060,000 machine hoursScheduling and setup273,000780 setupsMaterial handling640,0001,600,000 pounds of materialThe company's products and other opertating slatisties followProductsDieet costsS80,000$80,00$90,000Machine bours30,00010,00020,000Number of setups130380270Pounds of material500,000300,000800,000Number of units produced40,00020,00060,000Direct labor hours32.00018,00050,000Required:2. Determine unit product cost using the apyropriate cost drivers( ABC) fet cach ofthe products.b. Before it installed an ABC system, the company used a conventiona!costing(Simple) system and allocated factory overhesd to products using đirect labortours. Determine unit costs for each of the products.

This question deals with the calculation of unit cost under ABC costing system and conventional…

Belton Fumitue Corporation has identified activity centers to which overhes costs ate assiened. The cost pool amounts for these centers and their sekcted activity drivers for 2012 are as follow2 Activity Centers Costs Activity Drivers Utilities $30,000 60,000 machinc hours Scheduling and setup 273.000 780 setups Material handlingr 640,000 1,600,000 pounds of material The company's products and other operating slatistics follow Products A Direct costs $80,000 $80,000 $90,000 Machine bours 30,000 10,000 20,000 Number of setups 130 380 270 Pounds of material 500,000 300,000 800,000 Number of units produced 40,000 20,000 60,000 Direct labor hours 32,000 18,000 50,000 Required: 2. Determine unit product cost using the apyropriate cost drivers( ABC) fet cach of the products b. Before it installed an ABC system, the company used a conventiona! costing(Simple) system and allocated factory overhead to products using đirect labor tours. Determine unit costs for each of the products

Belton Fumitue Corporation has identified activity centers to which overhes costs ate assiened. The cost pool amounts for these centers and their sekcted activity drivers for 2012 are as follow2 Activity Centers Costs Activity Drivers Utilities $30,000 60,000 machinc hours Scheduling and setup 273.000 780 setups Material handlingr 640,000 1,600,000 pounds of material The company's products and other operating slatistics follow Products A Direct costs $80,000 $80,000 $90,000 Machine bours 30,000 10,000 20,000 Number of setups 130 380 270 Pounds of material 500,000 300,000 800,000 Number of units produced 40,000 20,000 60,000 Direct labor hours 32,000 18,000 50,000 Required: 2. Determine unit product cost using the apyropriate cost drivers( ABC) fet cach of the products b. Before it installed an ABC system, the company used a conventiona! costing(Simple) system and allocated factory overhead to products using đirect labor tours. Determine unit costs for each of the products

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 1PB: The following product costs are available for Stellis Company on the production of erasers: direct...

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Lansing. Inc., provided the following data for its two producing departments: Machine hours are used to assign the overhead of the Molding Department, and direct labor hours are used to assign the overhead of the Polishing Department. There are 30,000 units of Form A produced and sold and 50,000 of Form B. Required: 1. Calculate the overhead rates for each department. 2. Using departmental rates, assign overhead to live two products and calculate the overhead cost per unit. How does this compare with the plantwide rate unit cost, using direct labor hours? 3. What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form B and the direct labor hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overhead cost per unit for each product using departmental rates, and compare with the plantwide rate unit costs calculated in Requirement 2. What can you conclude from this outcome?
John Sheng, a cost accountant at Starlet Company, is developing departmental factory overhead application rates for the companys Tooling and Fabricating departments. The budgeted overhead for each department and the data for one job are as follows: Using the departmental overhead application rates, total overhead applied to Job 231 in the Tooling and Fabricating departments will be: a. 225. b. 303. c. 537. d. 671.
Kenkel, Ltd. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 80,000. b. Requisitioned raw materials to production, 80,000. c. Distributed direct labor costs, 10,000. d. Factory overhead costs incurred, 60,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 225,000, on account.
Minor Co. has a job order cost system and applies overhead based on departmental rates. Service Department 1 has total budgeted costs of 168,000 for next year. Service Department 2 has total budgeted costs of 280,000 for next year. Minor allocates service department costs solely to the producing departments. Service Department 1 cost is allocated to producing departments on the basis of machine hours. Service Department 2 cost is allocated to producing departments on the basis of direct labor hours. Producing Department 1 has budgeted 8,000 machine hours and 12,000 direct labor hours. Producing Department 2 has budgeted 2,000 machine hours and 12,000 direct labor hours. What is the total cost allocation from the two service departments to Producing Department 1? a. 173,600 b. 140,000 c. 134,400 d. 274,400
Steeler Towel Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours. Calculate the predetermined overhead rate using: A. Direct labor hours B. Direct labor dollars C. Machine hours
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Green Bay Cheese Company estimates its overhead to be $375,000. It expects to have 125,000 direct labor hours costing $1,500,000 in labor and utilizing 15,000 machine hours. Calculate the predetermined overhead rate using: A. Direct labor hours B. Direct labor dollars C. Machine hours
Davis Co. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 70,000. b. Requisitioned raw materials to production, 70,000. c. Distributed direct labor costs, 15,000. d. Factory overhead costs incurred, 45,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 195,000, on account. (Hint: Use a single account for raw materials and work in process.)
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Douglas Davis, controller for Marston, Inc., prepared the following budget for manufacturing costs at two different levels of activity for 20X1: During 20X1, Marston worked a total of 80,000 direct labor hours, used 250,000 machine hours, made 32,000 moves, and performed 120 batch inspections. The following actual costs were incurred: Marston applies overhead using rates based on direct labor hours, machine hours, number of moves, and number of batches. The second level of activity (the right column in the preceding table) is the practical level of activity (the available activity for resources acquired in advance of usage) and is used to compute predetermined overhead pool rates. Required: 1. Prepare a performance report for Marstons manufacturing costs in the current year. 2. Assume that one of the products produced by Marston is budgeted to use 10,000 direct labor hours, 15,000 machine hours, and 500 moves and will be produced in five batches. A total of 10,000 units will be produced during the year. Calculate the budgeted unit manufacturing cost. 3. One of Marstons managers said the following: Budgeting at the activity level makes a lot of sense. It really helps us manage costs better. But the previous budget really needs to provide more detailed information. For example, I know that the moving materials activity involves the use of forklifts and operators, and this information is lost when only the total cost of the activity for various levels of output is reported. We have four forklifts, each capable of providing 10,000 moves per year. We lease these forklifts for five years, at 10,000 per year. Furthermore, for our two shifts, we need up to eight operators if we run all four forklifts. Each operator is paid a salary of 30,000 per year. Also, I know that fuel costs about 0.25 per move. Assuming that these are the only three items, expand the detail of the flexible budget for moving materials to reveal the cost of these three resource items for 20,000 moves and 40,000 moves, respectively. Based on these comments, explain how this additional information can help Marston better manage its costs. (Especially consider how activity-based budgeting may provide useful information for non-value-added activities.)
Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs for the past 10 months. Nizam Sanjay, a member of the controllers department, believes that overhead activities and costs should be classified into groups that have the same driver. He has decided that unloading incoming goods, counting goods, and inspecting goods can be grouped together as a more general receiving activity, since these three activities are all driven by the number of receiving orders. The 10 months of data shown below have been gathered for the receiving activity. Required: 1. Prepare a scattergraph, plotting the receiving costs against the number of purchase orders. Use the vertical axis for costs and the horizontal axis for orders. 2. Select two points that make the best fit, and compute a cost formula for receiving costs. 3. Using the high-low method, prepare a cost formula for the receiving activity. 4. Using the method of least squares, prepare a cost formula for the receiving activity. What is the coefficient of determination?
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