E4-4 Assigning Costs Using Activity Rates [LO 4-4] Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows: Total Cost Estimated Cost Driver Activity Cost Pools Machining Designing costs Setup costs of Pool Cost Driver $183,300 47,725 71,150 Number of machine hours 61,100 5,750 500 Number of design hours Number of batches Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows: Product A Product B Product C 21,000 2,300 60 31,000 1,350 180 9,100 2,100 260 Number of machine hours Number of design hours Number of batches Required: Using activity rates, determine the amount of overhead assigned to each product. (Round activity rates to 2 decimal places. Round your other intermediate calculations and final answer to the nearest whole dollar amount.) Total Overhead Assigned 89,920 Product A $ $ Product B 129,360 Product C 81,020

E4-4 Assigning Costs Using Activity Rates [LO 4-4] Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows: Total Cost Estimated Cost Driver Activity Cost Pools Machining Designing costs Setup costs of Pool Cost Driver $183,300 47,725 71,150 Number of machine hours 61,100 5,750 500 Number of design hours Number of batches Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows: Product A Product B Product C 21,000 2,300 60 31,000 1,350 180 9,100 2,100 260 Number of machine hours Number of design hours Number of batches Required: Using activity rates, determine the amount of overhead assigned to each product. (Round activity rates to 2 decimal places. Round your other intermediate calculations and final answer to the nearest whole dollar amount.) Total Overhead Assigned 89,920 Product A $ $ Product B 129,360 Product C 81,020

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 68P: (Appendix 3A) Scattergraph, High-Low Method, Method of Least Squares, Use of Judgment The management...

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Activity-based costing in an insurance company Umbrella Insurance Company carries three major lines of insurance: auto, workers' compensation, and homeowners. The company has prepared the following report for 20Y2: Management is concerned that the administrative expenses may make some of the insurance lines unprofitable. However, the administrative expenses have not been allocated to the insurance lines. The controller has suggested that the administrative expenses could be assigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: Activity-base usage data for each line of insurance were retrieved from the corporate records and are shown below. a.Complete the product profitability report through the administrative activities. b.Determine the underwriting income as a percent of premium revenue. C.Determine the Operating income as a percent of premium revenue, rounded to one decimal place. d.Interpret the report.
(Appendix 3A) Separating Fixed and Variable Costs, Service Setting Louise McDermott, controller for the Galvin plant of Veromar Inc., wanted to determine the cost behavior of moving materials throughout the plant. She accumulated the following data on the number of moves (from 100 to 800 in increments of 100) and the total cost of moving materials at those levels of moves: Required: 1. Prepare a scattergraph based on these data. Use cost for the vertical axis and number of moves for the horizontal axis. Based on an examination of the scattergraph, does there appear to be a linear relationship between the total cost of moving materials and the number of moves? 2. Compute the cost formula for moving materials by using the high-low method. Calculate the predicted cost for a month with 550 moves by using the high-low formula. (Note: Round the answer for the variable rate to three decimal places and the answer for total fixed cost and total cost to the nearest dollar.) 3. CONCEPTUAL CONNECTION Compute the cost formula for moving materials using the method of least squares. (Note: For the method of least squares, round the variable rate to two decimal places and total fixed cost and total cost to the nearest dollar.) Using the regression cost formula, what is the predicted cost for a month with 550 moves? What does the coefficient of determination tell you about the cost formula computed by regression? 4. CONCEPTUAL CONNECTION Evaluate the cost formula using the least squares coefficients. Could it be improved? Try dropping the third data point (300, 3,400), and rerun the regression.
Activity-based costing systems: A. use a single predetermined overhead rate based on machine hours instead of on direct labor B. frequently increase the overhead allocation to at least one product while decreasing the overhead allocation to at least one other product C. limit the number of cost pools D. always result in an increase of at least one products selling price
Using the data in P4-2 and Microsoft Excel: 1. Separate the variable and fixed elements. 2. Determine the cost to be charged to the product for the year. 3. Determine the cost to be charged to factory overhead for the year. 4. Determine the plotted data points using Chart Wizard. 5. Determine R2. 6. How do these solutions compare to the solutions in P4-2 and P4-3? 7. What does R2 tell you about this cost model?
5. Match the following cost pools and activities with the most appropriate cost driver. Group of answer choices a. number of parts b. square feet c. direct labor hours d. number of tests required e. machine hours f. machine setups g. number of orders received 1. setup cost pool? 2. assembly cost pool? 3. supervising cost pool? 4. testing cost pool? 5. ordering cost pool? 6. fringe…
3 2. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea, and it came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities follow: 5 ints 00:40:40 Activity Cost Pool and Activity Measure Purchase orders (number of orders) Rework requests (number of requests) Product testing (number of tests) Machine related (machine-hours) Activity Cost Pool Purchase orders Rework requests Product testing Machine related Estimated Overhead Cost $ 170,000 374,400 350,000 1,150,000 $2,044,400 Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools. Activity Rate per order per request per test per MH Deluxe 1,000 600 5,000 18,000 Activity Regular 1,500 1,200 12,500 28,000 Total 2,500 1,800 17,500 46,000 3. Assume that actual activity is as expected for the year. Using activity-based costing, do the following: a. Determine the…
E6-2A High-Low Method Apply the high-low method of cost analysis to the three cost data groups in E6-1A. What cost behavior are apparent? Express each as a cost formula. Volume (applicable to each group) Group A Costs Group B Costs Group C Costs 2,000 $2,600 $1,000 $2,400 12,000 12,600 6,000 2,400 16,000 16,600 8,000 2,400 20,000 20,600 10,000 2,400
4. Overheads applied are calculated by: Select one: A. Cost driver divided by the OAR B. OAR times the estimated cost driver activity C. OAR times the actual cost driver activity D. Budgeted production overheads divided by the budgeted cost driver activity 5. Under-allocated manufacturing overhead costs are always the result of which of the following situations? Select one: A. Estimated overhead costs are greater than actual overhead costs. B. Actual overhead costs are less than applied overhead costs. C. Actual overhead costs are greater than estimated overhead costs. D. Applied overhead costs are less than actual overhead costs. 6. The centrepiece of a job-costing system is the: Select one: a. materials requisition form b. job-cost sheet c. labour time ticket d. budgeted overhead rate 7.Black Company uses predetermined overhead rates to apply manufacturing overheads to jobs. The predetermined overhead rates are based on machine hours in Department A and direct labour cost in…
2. The internal cost analysis process involves the following in what order? (A) Identify the links between the process and check for opportunities to lower costs, (B) Identify the value creating processes and the cost of each, (C) Identify the cost driver for each process and the cost per activity level. a. A, B, Cb. C, A, Bc. B, A, Cd. B, C, A
eBook Carlton's Kitchen's three cost pools and overhead estimates are as follows: Activity Cost Pool Cost Driver EstimatedOverhead Use perProduct A Use perProduct B Machine Setups Setups $162,000 5,000 4,000 Assembly Number of Parts 68,000 24,000 44,000 Machine Maintenance Machine Hours 150,000 13,000 37,000 Compare the overhead allocation using (A) the traditional allocation method and (B) the activity-based costing method. (Hint: the traditional method uses machine hours as the allocation base.) For those boxes in which you must enter subtractive or negative numbers use a minus sign. Product A Product B Total Overhead (ABC) $fill in the blank 1 $fill in the blank 2 Total overhead (traditional) fill in the blank 3 fill in the blank 4 Difference $fill in the blank 5 $fill in the blank 6
C15Q5 Need help Using the step-down method, allocate support-department costs. Develop overhead rates per direct manufacturing labor-hour for machining and assembly. Allocate the costs of the support departments in the order given in this problem. Use the allocation base for each support department you think is most appropriate. 2. Using the direct method, rework requirement 1. 3. Based on the following information about two jobs, determine the total overhead costs for each job by using rates developed in (a) requirement 1 and (b) requirement 2. Direct Manufacturing Labor–Hours Machining Assembly Job 88 23 2 Job 89 5 22 4. The company evaluates the performance of the operating department managers on the basis of how well they managed their total costs, including allocated costs. As the manager of the Machining Department, which allocation method would you prefer from the results obtained in requirements…
Match the terms a through d with their correct definition 1 through 4. a. Standard cost card b. Management by exception c. Standard cost d. Ideal standard 1. Quantity of input required if a production process is 100% efficient. 2. Managing by focusing on large differences from standard costs. 3. Record that accumulates standard cost information. 4. Preset cost for delivering a product or service under normal conditions.