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E4-24A Compare traditional and ABC allocations on a job (Learning Objective 2) Radley Products has adopted an ABC costing system. The following manufacturing activi ties, indirect manufacturing costs, and cost drivers have been identified: Total estimated MOH costs related to activity $ 120,000 $1,050,000 $ 80,000 $ 280,000 S 120.000 Activity Machine setup Total estimated amount of allocation base activity 2,000 setups Machining Polishing Quality control Facility-level costs Total manufacturing overhead (MOH) 6,000 machine hours 10,000 polishing cloths 4,000 tests run 50,000 DL hours $1.650.000 The Job Cost Record for Job 8624 revealed that direct materials requisitioned for the job totaled $1,050. The Job Cost Record also showed that direct labor for this job totaled 10 hours at a wage rate of $25 per hour. Other data collected on the resources used by Job #624 included: 1 machine setup required 5 machine hours 2 polishing cloths 2 quality control tests run Requirements 1. Calculate the activity cost allocation rate for each of the five pools listed in the table. 2. Calculate the total cost of Job #624 (use an ABC costing system). 3. Why would ABC provide a more accurate allocation of manufacturing overhead (MOH) than a plantwide rate? 4. Assume that Radley Products used a traditional costing system rather than an ABC sys MOH rate would have been determined using direct labor (DL) hours

E4-24A Compare traditional and ABC allocations on a job (Learning Objective 2) Radley Products has adopted an ABC costing system. The following manufacturing activi ties, indirect manufacturing costs, and cost drivers have been identified: Total estimated MOH costs related to activity $ 120,000 $1,050,000 $ 80,000 $ 280,000 S 120.000 Activity Machine setup Total estimated amount of allocation base activity 2,000 setups Machining Polishing Quality control Facility-level costs Total manufacturing overhead (MOH) 6,000 machine hours 10,000 polishing cloths 4,000 tests run 50,000 DL hours $1.650.000 The Job Cost Record for Job 8624 revealed that direct materials requisitioned for the job totaled $1,050. The Job Cost Record also showed that direct labor for this job totaled 10 hours at a wage rate of $25 per hour. Other data collected on the resources used by Job #624 included: 1 machine setup required 5 machine hours 2 polishing cloths 2 quality control tests run Requirements 1. Calculate the activity cost allocation rate for each of the five pools listed in the table. 2. Calculate the total cost of Job #624 (use an ABC costing system). 3. Why would ABC provide a more accurate allocation of manufacturing overhead (MOH) than a plantwide rate? 4. Assume that Radley Products used a traditional costing system rather than an ABC sys MOH rate would have been determined using direct labor (DL) hours

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter12: Activity-based Management
Section: Chapter Questions
Problem 23P: Joseph Fox, controller of Thorpe Company, has been in charge of a project to install an...
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Activity-Based Costing, Lean Operations, and the Costs of Quality E4-24A Compare traditional and ABC allocations on a job (Learning Objective 2) Radley Products has adopted an ABC costing system. The following manufacturing activi- ties, indirect manufacturing costs, and cost drivers have been identified: Activity Machine setup Total estimated MOH costs related to activity Total estimated amount of allocation base activity $ 120,000 $1,050,000 Machining Polishing Quality control Facility-level costs sdngas 000' 6,000 machine hours 10,000 polishing cloths 4,000 tests run 50,000 DL hours 000'08 $ 280,000 $ 120.000 Total manufacturing overhead (MOH) $1.650.000 The Job Cost Record for Job #624 revealed that direct materials requisitioned for the job totaled $1,050. The Job Cost Record also showed that direct labor for this job totaled 10 hours at a wage rate of 525 per hour. Other data collected on the resources used by Job #624 included: 1 machine setup required 5 machine hours 2 polishing cloths 2 quality control tests run Requirements 1. Calculate the activity cost allocation rate for each of the five pools listed in the table. 2. Calculate the total cost of Job #624 (use an ABC costing system). 3. Why would ABC provide a more accurate allocation of manufacturing overhead (MOH) than a plantwide rate? 4. Assume that Radley Products used a traditional costing system rather than an ABC sys- tem. Its plantwide MOH rate would have been determined using direct labor (DL) hours as the allocation base. How much cost distortion would have occurred on this job?
Transcribed Image Text:Activity-Based Costing, Lean Operations, and the Costs of Quality E4-24A Compare traditional and ABC allocations on a job (Learning Objective 2) Radley Products has adopted an ABC costing system. The following manufacturing activi- ties, indirect manufacturing costs, and cost drivers have been identified: Activity Machine setup Total estimated MOH costs related to activity Total estimated amount of allocation base activity $ 120,000 $1,050,000 Machining Polishing Quality control Facility-level costs sdngas 000' 6,000 machine hours 10,000 polishing cloths 4,000 tests run 50,000 DL hours 000'08 $ 280,000 $ 120.000 Total manufacturing overhead (MOH) $1.650.000 The Job Cost Record for Job #624 revealed that direct materials requisitioned for the job totaled $1,050. The Job Cost Record also showed that direct labor for this job totaled 10 hours at a wage rate of 525 per hour. Other data collected on the resources used by Job #624 included: 1 machine setup required 5 machine hours 2 polishing cloths 2 quality control tests run Requirements 1. Calculate the activity cost allocation rate for each of the five pools listed in the table. 2. Calculate the total cost of Job #624 (use an ABC costing system). 3. Why would ABC provide a more accurate allocation of manufacturing overhead (MOH) than a plantwide rate? 4. Assume that Radley Products used a traditional costing system rather than an ABC sys- tem. Its plantwide MOH rate would have been determined using direct labor (DL) hours as the allocation base. How much cost distortion would have occurred on this job?
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