Carla Vista Footwear Co. produces high-quality shoes. To prepare for next year's marketing campaign, the company's controller has prepared the following information for the current year, 2022: Variable costs (per pair of shoes) Direct materials Direct manufacturing labour Variable overhead (manufacturing, marketing, distribution, customer service, and administration) Total variable costs Fixed costs Manufacturing Marketing, distribution, and customer service Administrative Total fixed costs. Selling price per pair of shoes Expected revenues, 2022 (51,800 units) Income tax rate $177 $9,168,600 $39 40% 18. 20 $2,645,000 540,000 700,000 $3,885,000 $77

Carla Vista Footwear Co. produces high-quality shoes. To prepare for next year's marketing campaign, the company's controller has prepared the following information for the current year, 2022: Variable costs (per pair of shoes) Direct materials Direct manufacturing labour Variable overhead (manufacturing, marketing, distribution, customer service, and administration) Total variable costs Fixed costs Manufacturing Marketing, distribution, and customer service Administrative Total fixed costs. Selling price per pair of shoes Expected revenues, 2022 (51,800 units) Income tax rate $177 $9,168,600 $39 40% 18. 20 $2,645,000 540,000 700,000 $3,885,000 $77

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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Bumblebee Mobiles manufactures a line of cell phones. The management has identified the following overhead costs and related cost drivers for the coming year. The following were incurred in manufacturing two of their cell phones, Bubble and Burst, during the first quarter. REQUIREMENT Review the worksheet called ABC that follows these requirements. You have been asked to determine the cost of each product using an activity-based cost system. Note that the problem information is already entered into the Data Section of the ABC worksheet.
The management of Hartman Company is trying to determine the amount of each of two products to produce over the coming planning period. The following information concerns labor availability, labor utilization, and product profitability: a. Develop a linear programming model of the Hartman Company problem. Solve the model to determine the optimal production quantities of products 1 and 2. b. In computing the profit contribution per unit, management does not deduct labor costs because they are considered fixed for the upcoming planning period. However, suppose that overtime can be scheduled in some of the departments. Which departments would you recommend scheduling for overtime? How much would you be willing to pay per hour of overtime in each department? c. Suppose that 10, 6, and 8 hours of overtime may be scheduled in departments A, B, and C, respectively. The cost per hour of overtime is 18 in department A, 22.50 in department B, and 12 in department C. Formulate a linear programming model that can be used to determine the optimal production quantities if overtime is made available. What are the optimal production quantities, and what is the revised total contribution to profit? How much overtime do you recommend using in each department? What is the increase in the total contribution to profit if overtime is used?
Young Company is beginning operations and is considering three alternatives to allocate manufacturing overhead to individual units produced. Young can use a plantwide rate, departmental rates, or activity-based costing. Young will produce many types of products in its single plant, and not all products will be processed through all departments. In which one of the following independent situations would reported net income for the first year be the same regardless of which overhead allocation method had been selected? a. All production costs approach those costs that were budgeted. b. The sales mix does not vary from the mix that was budgeted. c. All manufacturing overhead is a fixed cost. d. All ending inventory balances are zero.
Boston Executive. Inc., produces executive limousines and currently manufactures the mini-bar inset at these costs: The company received an offer from Elite Mini-Bars to produce the insets for $2,100 per Unit and supply 1,000 mini-bars for the coming years estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the companys total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased. The specialized equipment cannot be used and has no market value. However, the space occupied by the mini bar production can be used by a different production group that will lease it for $55,000 per year. Should the company make or buy the mini-bar insert?
Handbrain Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 2,000 direct labor hours. The total indirect labor is budgeted to be 200,000. Time records from indirect labor employees revealed that they spent 30% of their time setting up production runs and 70% of their time supporting actual production. The following information about cell phones and tablet PCs was determined from the corporate records: a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base. b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activitiesone for setup and the other for production support. c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing. d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)?
A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price would be 11.50). The order would require specialized materials costing 4.00 per unit. Direct labor and variable factory overhead would cost 2.15 per unit. Fixed factory overhead is 1.20 per unit. However, the company has excess capacity, and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing 1,300. Which of the following is relevant to the special order? a. 11.50 b. 1.20 c. 7.35 d. 8.90
Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below. At the zero-defect state, Nabors expects to spend 375,000 on quality engineering, 75,000 on vendor certification, and 50,000 on packaging inspection. Assume sales to be 25,000,000. Required: 1. Prepare a long-range performance report for 20x5. What does this report tell the management of Nabors? 2. Explain why quality costs still are present for the zero-defect state. 3. What if Nabors achieves the zero-defect state reflected in the report? What are some of the implications of this achievement?
Pinter Company had the following environmental activities and product information: 1. Environmental activity costs 2. Driver data 3. Other production data Required: 1. Calculate the activity rates that will be used to assign environmental costs to products. 2. Determine the unit environmental and unit costs of each product using ABC. 3. What if the design costs increased to 360,000 and the cost of toxic waste decreased to 750,000? Assume that Solvent Y uses 6,000 out of 12,000 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 14,250 of 15,000 pounds of toxic waste. What is the new environmental cost for Solvent Y?
Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is: Previously, Sanjay Bhatt, Firenza Companys controller, had applied overhead on the basis of machine hours. Expected machine hours for the coming year are 50,000. Sanjay has been reading about activity-based costing, and he wonders whether or not it might offer some advantages to his company. He decided that appropriate drivers for overhead activities are purchase orders for purchasing, number of setups for setup cost, engineering hours for engineering cost, and machine hours for other. Budgeted amounts for these drivers are 5,000 purchase orders, 500 setups, and 2,500 engineering hours. Sanjay has been asked to prepare bids for two jobs with the following information: The typical bid price includes a 40 percent markup over full manufacturing cost. Required: 1. Calculate a plantwide rate for Firenza Company based on machine hours. What is the bid price of each job using this rate? 2. Calculate activity rates for the four overhead activities. What is the bid price of each job using these rates? 3. Which bids are more accurate? Why?
Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following information to a single part that is used in the production of a wind instrument. The business earned an Operating Income of $220,000 in 2019 when production was 3,000 units and the president of Darius is under pressure from shareholders to increase operating income in 2020 and is therefore considering the implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $58 Direct Labour $74 Variable Manufacturing Overhead $48Fixed expenses: Fixed Manufacturing Overhead $215,000…
Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following information to a single part that is used in the production of a wind instrument. The business earned an Operating Income of $220,000 in 2019 when production was 3,000 units and the president of Darius is under pressure from shareholders to increase operating income in 2020 and is therefore considering the implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $58 Direct Labour $74 Variable Manufacturing Overhead $48Fixed expenses:…
Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following information to a single part that is used in the production of a wind instrument. The business earned an Operating Income of $220,000 in 2019 when production was 3,000 units and the president of Darius is under pressure from shareholders to increase operating income in 2020 and is therefore considering the implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $58 Direct Labour $74 Variable Manufacturing Overhead $48 Fixed expenses: Fixed Manufacturing Overhead $215,000 Fixed Selling Costs $65,000 Fixed Administrative Costs $160,000 Required: 2. Briefly explain the impact of each of the following scenarios on the break-even point and the margin of safety: Increase in…