Chapter 5Activity-Based Costing.4.ORequired:nem tumbong srl sarhos bing1. Using Exhibit 5-6 as a guide, perform the first-stage allocation of costs to the activity cost pools.2. Using Exhibit 5-7 as a guide, compute the activity rates for the activity cost pools.ni3. Using the activity rates you have computed, determine the total cost and the average cost perthousand square feet of each of the following jobs according to the activity-based costing system.A routine 1,000-square-foot asbestos removal job.A routine 2,000-square-foot asbestos removal job.a.b.C. A nonroutine 2,000-square-foot asbestos removal job.12099Given the results you obtained in (3) above, do you agree with the estimator that the com-pany's present policy for bidding on jobs is adequate?itaib PROBLEM 5-18 Activity-Based Costing and Bidding on Jobs L05-2, L05-3, LO5-4 AMercer Asbestos Removal Company removes potentially toxic asbestos insulation and relatedproducts from buildings. There has been a long-simmering dispute between the company's estima-tor and the work supervisors. The on-site supervisors claim that the estimators do not adequatelydistinguish between routine work, such as removal of asbestos insulation around heating pipesin older homes, and nonroutine work, such as removing asbestos-contaminated ceiling plaster inindustrial buildings. The on-site supervisors believe that nonroutine work is far more expensivethan routine work and should bear higher customer charges. The estimator sums up his position inthis way: "My job is to measure the area to be cleared of asbestos. As directed by top management,I simply multiply the square footage by $2.50 to determine the bid price. Since our average costis only $2.175 per square foot, that leaves enough cushion to take care of the additional costs ofnonroutine work that shows up. Besides, it is difficult to know what is routine or not routine untilyou actually start tearing things apart."To shed light on this controversy, the company initiated an activity-based costing study of allof its costs. Data from the activity-based costing system follow:elliseyouqmos sill usiw systeai quegrado srit to theo lls modActivity Cost PoolRemoving asbestos.Estimating and job setupWorking on nonroutine jobsOther (organization-sustainingcosts and idle capacity costs)....haulNoneNote: The 100 nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routinejobs require estimating and setup.mbe 106 apCosts for the YearWages and salaries..Disposal feesEquipment depreciation.On-site supplies.dint Office expenses...amovaLicensing and insuranceTotal cost.Activity MeasureThousands of square feetNumber of jobsNumber of nonroutine jobsWages and salaries.Disposal fees.Equipment depreciation.On-site supplies.Office expenses.Licensing and insurance50%60%40%60%10%30%Distribution of Resource ConsumptionAcross Activities10%0%Total Activity800 thousand square feet500 jobs100 nonroutine jobsWorking onRemoving Estimating and NonroutineAsbestosJob SetupJobsthan 5%30%35%0%$ 300,000700,00090,00050,000200,000400,000$1,740,000HETool adi gin30%in 40%20%10%25%50%Other10%0%35%0%30%20%noshuda23161SeptTotal100%100%100%100%100%100%

Activity-based costing is a costing approach in which a company's activities are identified and the…

Chapter 5 Required: 1. 2. Using Exhibit 5-7 as a guide, compute the activity rates for the activity cost pools.ni Using Exhibit 5-6 as a guide, perform the first-stage allocation of costs to the activity cost pools. 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. A routine 1,000-square-foot asbestos removal job. A routine 2,000-square-foot asbestos removal job. A nonroutine 2,000-square-foot asbestos removal job. Given the results you obtained in (3) above, do you agree with the estimator that the com- pany's present policy for bidding on jobs is adequate? a. b. C. 4. MAJOR

Chapter 5 Required: 1. 2. Using Exhibit 5-7 as a guide, compute the activity rates for the activity cost pools.ni Using Exhibit 5-6 as a guide, perform the first-stage allocation of costs to the activity cost pools. 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. A routine 1,000-square-foot asbestos removal job. A routine 2,000-square-foot asbestos removal job. A nonroutine 2,000-square-foot asbestos removal job. Given the results you obtained in (3) above, do you agree with the estimator that the com- pany's present policy for bidding on jobs is adequate? a. b. C. 4. MAJOR

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter10: Accounting Systems For Manufacturing Operations

Section: Chapter Questions

Problem 10.4.2C: Factory overhead rate Fabricator Inc., a specialized equipment manufacturer, uses a job order cost...

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Problem 7-18 (Algo) Activity-Based Costing and Bidding on Jobs [LO7-2, LO7-3, LO7-4] Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company’s estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and nonroutine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: “My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $3.60 to determine the bid price. Since our average cost is only $2.775 per square foot, that leaves enough…
Problem 7-65 (Algo) Job Costing and Ethics (LO 7-2, 3, 5) Old Port Shipyards does work for both the U.S. Navy and private shipping companies. Old Port's major business is renovating ships, which it does at one of two company dry docks referred to by the names of the local towns: Olde Town and Newton. Data on operations and costs for the two dry docks follow: Olde Town Newton Overhead cost $ 48,600,000 $ 91,800,000 Direct labor-hours 180,000 180,000 Virtually all dry dock costs consist of depreciation. The Newton dry dock is much newer, so the depreciation on it is much higher. Dry dock overhead is charged to jobs based on direct labor-hours for the specific dock. Old Port is about to start two jobs, one for the Navy under a cost-plus contract and one for a private shipping company for a fixed fee. Both jobs will require the same number of hours. You have been asked to prepare some costing information. Your supervisor tells you that she is sure the…
Factory overhead rate Fabricator Inc., a specialized equipment manufacturer, uses a job order cost system. The overhead is allocated to jobs on the basis of direct labor hours. The overhead rate is now $3,000 per direct labor hour. The design engineer thinks that this is illogical. The design engineer has stated the following: Our accounting system doesn't make any sense to me. It tells me that every labor hour carries an additional burden of $3,000. This means that while direct labor makes up only 5% of our total product cost, it drives all our costs. In addition, these rates give my design engineers incentives to "design out" direct labor by using machine technology. Yet, over the past years as we have had less and less direct labor, the overhead rate keeps going up and up. I won't be surprised if next year the rate is $4,000 per direct labor hour. I'm also concerned because small errors in our estimates of the direct labor content can have a large impact on our estimated costs. Just a 30~minute error in our estimate of assembly time is worth $ 1,500. Small mistakes in our direct labor time estimates really swing our bids around. I think this puts us at a disadvantage when we are going after business. What do you think is a possible solution?
Factory overhead rate Fabricator Inc., a specialized equipment manufacturer, uses a job order cost system. The overhead is allocated to jobs on the basis of direct labor hours. The overhead rate is now $3,000 per direct labor hour. The design engineer thinks that this is illogical. The design engineer has stated the following: Our accounting system doesn't make any sense to me. It tells me that every labor hour carries an additional burden of $3,000. This means that while direct labor makes up only 5% of our total product cost, it drives all our costs. In addition, these rates give my design engineers incentives to "design out" direct labor by using machine technology. Yet, over the past years as we have had less and less direct labor, the overhead rate keeps going up and up. I won't be surprised if next year the rate is $4,000 per direct labor hour. I'm also concerned because small errors in our estimates of the direct labor content can have a large impact on our estimated costs. Just a 30~minute error in our estimate of assembly time is worth $ 1,500. Small mistakes in our direct labor time estimates really swing our bids around. I think this puts us at a disadvantage when we are going after business. What did the engineer mean about the large overhead rate being a disadvantage when plating bids and seeking new business?
Defective work Herbert Electronics manufactures an integrated transistor circuit board for repeat customers but also accepts special orders for the same product. Job No. JM4 incurred the following unit costs for 1,000 circuit boards manufactured: When the completed products were tested, 50 circuit boards were found to be defective. The costs per unit of correcting the defects follow: Record the journal entry for the costs to correct the defective work: a. If the cost of the defective work is charged to factory overhead. b. If the cost of the defective work is charged to the specific job.
Decision making with job order costs Alvarez Manufacturing Inc. is a job shop. The management of Alvarez Manufacturing Inc. uses the cost information from the job sheets to assess cost performance. Information on the total cost, product type, and quantity of items produced is as follows: Date Job No. Product Quantity Amount Jan. 2 1 TT 520 16,120 Jan. 15 22 SS 1,610 20,125 Feb. 3 30 SS 1,420 25,560 Mar. 7 41 TT 670 15,075 Mar. 24 49 SLK 2,210 22,100 May 19 58 SLK 2,550 31,875 June 12 65 TT 620 10,540 Aug. 18 78 SLK 3,110 48,205 Sept. 2 82 SS 1,210 16,940 Nov. 14 92 TT 750 8,250 Dec. 12 98 SLK 2,700 52,650 a. Develop a graph for each product (three graphs), with Job Number (in date order) on the horizontal axis and Unit Cost on the vertical axis. Use this information to determine Alvarez Manufacturing Inc.'s cost performance over time for the three products. b. What additional information would you require in order to investigate Alvarez Manufacturing Inc.s cost performance more precisely?
please answer asap 1,2,3 Cost of Normal Spoilage Caused by Nature of Job Frieling Company installs granite countertops in customers' homes. First, the customer chooses the particular granite slab, and then Frieling measures the countertop area at the customer's home, cuts the granite to that shape, and installs it. The Tramel job calls for direct materials of $1,900 and direct labor of $500. Overhead is applied at the rate of 140 percent of direct labor cost. Unfortunately, one small countertop breaks during installation and Frieling must cut another piece and install it to properly complete the job. The additional rework required direct materials costing $400 and direct labor costing $100. Assume that the spoilage was due to the inherently fragile nature of the piece of stone picked out by the Tramels. Frieling had warned them that the chosen piece could require much more care and potentially additional work. As a result, Frieling considers this spoilage to be caused by the Tramels'…
Problem 3 Predertimed Factory Overhead Harold Corp uses the job order costing system. Factory overhead is applied to jobs on the basis of direct labor cost. The following estimates are made at the beginning of the year: Fabricating Machining Assembly Total Direct Labor 600,000 300,000 900,000 1,800,000 Fcatory overhead 1,050,000 1,200,000 270,000 2,520,000 The following are the cost required by each department. Fabricating Machining Assembly Total Direct Materials 9,000 600 4,200 13,800 Direct Labor 8,400 1,500 18,600 28,500 Factory overhead ? ? ? ? At the end of the year, the…
Problem 5- Average Costing ABS Manufacturing had the following production for the month of July: Work in process at July 1 10,000 Started during July 40,000 Completed and transferred to finished goods 33,000 Abnormal spoilage incurred 2,000 Work in process at July 31 15,000 Materials are added at the beginning of the process. As to conversion cost, the beginning work in process was 70% completed while ending work in process is 40% completed. Spoilage is detected at the end of the process. Using the weighted average method, how many were the equivalent units for July for conversion cost?
QUESTION THREE An engineering company which uses job costing to attribute costs to individual products and services provided to its customers has began the preparation of its fixed production overhead cost budget for 2017. Cost has been identified as follows: Machining Assembly Finishing Stores Maintenance K’000 K’000 K’000 K’000 K’000 Apportioned cost 6,000 2,500 1,500 1,000 800 The stores and maintenance departments are production department and provide services as follows: Machining Assembly Finishing Stores Maintenance Stores 40% 30% 20% - 10% Maintenance 55% 20% 20% 5% - The number of machine and labour hours budgeted for 2018 is: Machining…
Exercise 04-8 Using the plantwide overhead rate to assess prices LO P1 Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and round "Cost per unit and OH rate" answers to 2 decimal places.) Process Activity Overhead Cost Driver Quantity Components Changeover $ 458,500 Number of batches 750 Machining 300,400 Machine hours 7,670 Setups 228,000 Number of setups 20 $ 986,900 Finishing Welding $ 181,600 Welding hours 4,100 Inspecting 233,000 Number of inspections 760 Rework 60,500 Rework orders 160 $ 475,100…