Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: Indirect labor $507,000 Cutting Department 156,000 Finishing Department 192,000 Total $855,000 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: Activity Budgeted Activity Cost Activity Base Production control $237,000 Number of production runs Materials handling 270,000 Number of moves Total $507,000 The activity-base usage quantities and units produced for the two products follow: Number of Production Runs Number of Moves Direct Labor Hours-Cutting Direct Labor Hours-Finishing Units Produced Snowboards 430 5,000 4,000 2,000 6,000 Skis 70 2,500 2,000 4,000 6,000 Total 500 7,500 6,000 6,000 12,000 Required: 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 $315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent. Department Production Department Rate Cutting Department $ _____ per direct labor hour Finishing Department $ _____ per direct labor hour Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Round per unit amounts to the nearest whole cent. Product Total Factory Overhead Factory Overhead Per Unit Snowboards $ $ Skis $ $ Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Round per unit amounts to the nearest whole cent. Activity Activity Rate Production Control $ ______ per prod. run Materials Handling $ ______ per move Cutting Department $ _______ per dlh Finishing Department $ _______ per dlh Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent. Product Total Activity Cost Activity Cost Per Unit Snowboards $ $ Skis $ $ Comment on the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods. The activity-based overhead allocation reveals that _______ consume more factory overhead on a per-unit basis than do ________. The _______ method does not show this because all factory overhead is assumed to be proportional to direct labor hours. The ______ method separately accounts for the production control and materials handling activity costs. Snowboards have more production control and materials handling activities than do skis. This is because snowboards are made in smaller lots, representing a wide variety of styles. Thus, snowboards

Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: Indirect labor $507,000 Cutting Department 156,000 Finishing Department 192,000 Total $855,000 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: Activity Budgeted Activity Cost Activity Base Production control $237,000 Number of production runs Materials handling 270,000 Number of moves Total $507,000 The activity-base usage quantities and units produced for the two products follow: Number of Production Runs Number of Moves Direct Labor Hours-Cutting Direct Labor Hours-Finishing Units Produced Snowboards 430 5,000 4,000 2,000 6,000 Skis 70 2,500 2,000 4,000 6,000 Total 500 7,500 6,000 6,000 12,000 Required: 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 $315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent. Department Production Department Rate Cutting Department $ ___ per direct labor hour Finishing Department $ _ per direct labor hour Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Round per unit amounts to the nearest whole cent. Product Total Factory Overhead Factory Overhead Per Unit Snowboards $ $ Skis $ $ Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Round per unit amounts to the nearest whole cent. Activity Activity Rate Production Control $ per prod. run Materials Handling $ per move Cutting Department $ _ per dlh Finishing Department $ _ per dlh Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent. Product Total Activity Cost Activity Cost Per Unit Snowboards $ $ Skis $ $ Comment on the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods. The activity-based overhead allocation reveals that _ consume more factory overhead on a per-unit basis than do . The _ method does not show this because all factory overhead is assumed to be proportional to direct labor hours. The ____ method separately accounts for the production control and materials handling activity costs. Snowboards have more production control and materials handling activities than do skis. This is because snowboards are made in smaller lots, representing a wide variety of styles. Thus, snowboards

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 3PA: Activity-based and department rate product costing and product cost distortions Black and Blue...

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Question

Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows:

Indirect labor	$507,000
Cutting Department	156,000
Finishing Department	192,000
Total	$855,000

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:

Activity	Budgeted Activity Cost		Activity Base
Production control		$237,000		Number of production runs
Materials handling		270,000		Number of moves
Total		$507,000

The activity-base usage quantities and units produced for the two products follow:

	Number of Production Runs		Number of Moves	Direct Labor Hours-Cutting		Direct Labor Hours-Finishing	Units Produced
Snowboards		430			5,000			4,000	2,000	6,000
Skis		70			2,500			2,000	4,000	6,000
Total		500			7,500			6,000	6,000	12,000

Required:

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 $315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent.

Department	Production Department Rate
Cutting Department	$ _____ per direct labor hour
Finishing Department	$ _____ per direct labor hour

Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Round per unit amounts to the nearest whole cent.

Product	Total Factory Overhead	Factory Overhead Per Unit
Snowboards	$	$
Skis	$	$

Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Round per unit amounts to the nearest whole cent.

Activity	Activity Rate
Production Control	$ ______ per prod. run
Materials Handling	$ ______ per move
Cutting Department	$ _______ per dlh
Finishing Department	$ _______ per dlh

Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent.

Product	Total Activity Cost	Activity Cost Per Unit
Snowboards	$	$
Skis	$	$

Comment on the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods.

The activity-based overhead allocation reveals that _______ consume more factory overhead on a per-unit basis than do ________. The _______ method does not show this because all factory overhead is assumed to be proportional to direct labor hours. The ______ method separately accounts for the production control and materials handling activity costs. Snowboards have more production control and materials handling activities than do skis. This is because snowboards are made in smaller lots, representing a wide variety of styles. Thus, snowboards

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