Cost Drivers Activity Cost Pools Purchasing Estimated Expected Use of Overhead Cost Drivers Number of $1,200,000 40,000 orders Machine setups Number of setups Machine hours Number of inspections 900,000 18,000 Machining Quality Control 4,800,000 120,000 28,000 700,000 The cost drivers used: Cost Drivers Purchase orders Machine setups Machine hours Inspections TRI-X Product 17,000 5,000 75,000 11,000 Required: 1. Calculate the activity rates for each of the overhead items using the four cost drivers. 2. Using the rates in (1) determine the unit cost for TRI-X. 3. Calculate the gross profit of each model of TRI-X based on ABC costings and recommend whether or not TRI-X should be discontinued.
Cost Drivers Activity Cost Pools Purchasing Estimated Expected Use of Overhead Cost Drivers Number of $1,200,000 40,000 orders Machine setups Number of setups Machine hours Number of inspections 900,000 18,000 Machining Quality Control 4,800,000 120,000 28,000 700,000 The cost drivers used: Cost Drivers Purchase orders Machine setups Machine hours Inspections TRI-X Product 17,000 5,000 75,000 11,000 Required: 1. Calculate the activity rates for each of the overhead items using the four cost drivers. 2. Using the rates in (1) determine the unit cost for TRI-X. 3. Calculate the gross profit of each model of TRI-X based on ABC costings and recommend whether or not TRI-X should be discontinued.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Cost Drivers
Activity Cost
Pools
Purchasing
Estimated
Expected Use of
Overhead
Cost Drivers
Number of
$1,200,000
40,000
orders
Machine setups Number of
setups
Machine hours
Number of
inspections
900,000
18,000
Machining
Quality Control
4,800,000
120,000
28,000
700,000
The cost drivers used:
Cost Drivers
Purchase orders
Machine setups
Machine hours
Inspections
TRI-X Product
17,000
5,000
75,000
11,000
Required:
1. Calculate the activity rates for each of the overhead items using the four cost drivers.
2. Using the rates in (1) determine the unit cost for TRI-X.
3. Calculate the gross profit of each model of TRI-X based on ABC costings and recommend whether
or not TRI-X should be discontinued.
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