Happy Valley Land and Snow Company provides the following ABC costing information: Activities Total Costs Activity-cost drivers Labor hours $320,000 8,000 hours Gas $36,000 6,000 gallons Invoices $40,000 2,500 invoices Total costs $396,000 The above activities used by their three departments are:
Q: Happy Valley Land and Snow Company provides the following ABC costing information: Activities Total…
A: Labor cost per hour = Total labor cost / No. of labor hours = $320,000 / 8,000 hours = $40 per hour
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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- Charlies Wood Works produces wood products (e.g., cabinets, tables, picture frames, and so on). Production departments include Cutting and Assembly. The Janitorial and Security departments support the Cutting and Assembly departments. The Assembly Department spans about 46,400 square feet and holds assets valued at about 60,000. The Cutting Department spans about 33,600 square feet and holds assets valued at about 140,000. Charlies Wood Works allocates support department costs using the direct method. If costs from the Janitorial Department are allocated based on square feet and costs from the Security Department are allocated based on asset value, determine (a) the percentage of Janitorial costs that should be allocated to the Assembly Department and (b) the percentage of Security costs that should be allocated to the Cutting Department.2. Columbus Company provides the following ABC costing information: Activities Total Costs Activity-cost drivers Labor $384,000 8,000 hours Gas $36,000 6,000 gallons Invoices $180,000 7,500 invoices Total costs $600,000 The above activities used by their three departments are: Lawn Department Bush Department Plowing Department Labor 2,500 hours 1,400 hours 4,100 hours Gas 1,800 gallons 1,000 gallons 3,200 gallons Invoices 1,300 invoices 300 invoices 5,900 invoices How much of invoice cost will be assigned to the Bush Department? A) $7,200 B) $141,600 C) $31,200 D) $180,000 3. Milan Company has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year: Cost Pool Overhead Costs Cost driver Activity level Supervision of direct labor $624,000 Direct labor-hours 940,000 Machine maintenance $100,000 Machine-hours 840,000 Facility rent $216,000 Square feet of area 140,000 Total overhead costs $940,000 The accounting records…Use the following information for questions 2-4. Compute It uses activity-based costing. Two of Compute It’s production activities are kitting(assembling the raw materials needed for each computer in one kit) and boxing the completed products for shipment to customers. Assume that Compute It spends $960,000 per month on kitting and $32,000 per month on boxing. Compute It allocates the following: • Kitting costs based on the number of parts used in the computer • Boxing costs based on the cubic feet of space the computer requires Suppose Compute It estimates it will use 400,000 parts per month and ship products with a total volume of 6,400 cubic feet per month. Assume that each desktop computer requires 125 parts and has a volume of 2 cubic feet.Compute It contracts with its suppliers to pre-kit certain component parts before delivering them to Compute It. Assume this saves $210,000 of the kitting cost and reduces the total number of parts by 100,000 (because Compute It considers each…
- Use the following information for questions 2-4. Compute It uses activity-based costing. Two of Compute It’s production activities are Kitting (assembling the raw materials needed for each computer in one kit) and boxing the completed products for shipment to customers. Assume that Compute It spends $960,000 per month on kitting and $32,000 per month on boxing. Compute It allocates the following: • Kitting costs based on the number of parts used in the computer • Boxing costs based on the cubic feet of space the computer requires Suppose Compute It estimates it will use 400,000 parts per month and ship products with a total volume of 6,400 cubic feet per month. Assume that each desktop computer requires 125 parts and has a volume of 2 cubic feet. Compute It contracts with its suppliers to pre-kit certain component parts before delivering them to Compute It. Assume this saves $210,000 of the kitting cost and reduces the total number of parts by 100,000 (because Compute It considers each…Use the following information for questions 2-4. Compute It uses activity-based costing. Two of Compute It’s production activities are kitting(assembling the raw materials needed for each computer in one kit) and boxing the completed products for shipment to customers. Assume that Compute It spends $960,000 per month on kitting and $32,000 per month on boxing. Compute it allocates the following: • Kitting costs based on the number of parts used in the computer • Boxing costs based on the cubic feet of space the computer requires Suppose Compute It estimates it will use 400,000 parts per month and ship products with a total volume of 6,400 cubic feet per month. What are the predetermined overhead allocation rates?Memorial Services, Incorporated (MSI) has three service departments (IT, Accounting, and HR) and two production departments (West and East). The usage data for each of the service departments for the previous period follow: IT Accounting HR West East IT -- 0% 20% 40% 40% Accounting 0% -- 0% 40% 60% HR 10% 10% -- 60% 20% The direct costs of the service departments in the previous period were $91,000 for IT, $116,000 for Accounting, and $155,000 for HR. Required: Use the step method to allocate the service department costs to the two production departments. Allocate HR costs first, followed by IT, and then Accounting. Note: Amounts to be deducted should be indicated by a minus sign. IT Accounting HR West East Service department costs $ 0 HR allocation IT allocation Accounting allocation Total costs allocated $ 0 $ 0 $ 0 $ 0 $ 0 Need help please
- Hosmer Industries provides the following information about resources and usage: Unused Resources Capacity Cost Driver Volume Resources used Materials $ 4,800 6,400 pounds Power 3,744 272 hours Setups 1,800 62 setups Purchasing 4,320 64 purchase orders Client assistance 18,240 40 inquiries Supervision 8,160 256 labor-hours Facility cost 6,720 3,360 square meters Resources supplied Materials $ 235,200 Power 42,912 Setups 57,600 Purchasing 50,400 Client assistance 37,440 Supervision 69,600 Facility cost 67,200 Sales revenue for Hosmer Industries is $720,000. Required: Prepare a traditional income statement. Prepare an activity-based income statement.Support department cost allocation—direct method Becker Tabletops has two support departments (Janitorial and Cafeteria) and two production departments (Cutting and Assembly). Relevant details for these departments are as follows: Support Department Cost Driver Janitorial Department Square footage to be serviced Cafeteria Department Number of employees JanitorialDepartment CafeteriaDepartment CuttingDepartment AssemblyDepartment Department costs $300,000 $200,000 $1,500,000 $680,000 Square feet 50 5,000 2,000 3,000 Number of employees 8 3 40 10 Allocate the support department costs to the production departments using the direct method. CuttingDepartment AssemblyDepartment Janitorial Department cost allocation $ $ Cafeteria Department cost allocation $ $Cornerstones of Cost Management 4th Ed - Chapter 4 Scenario III: Goodmark Company produces two types of birthday cards: scented and regular. During the year, 20,000 scented cards and 200,000 regular cards were produced. Goodmark has two production departments: Cutting and Printing. Direct labor hours are used to assign the overhead of Cutting and machine hours are used for Printing. The data for the two producing departments are given below: Cutting Printing Total Direct labor hours: Scented 10,000 10,000 20,000 Regular 150,000 10,000 160,000 Total 160,000 20,000 180,000 Machine hours: Scented 2,000 8,000 10,000 Regular 8,000 72,000 80,000 10,000 80,000 90,000 Overhead costs $216,000 $504,000 $720,000 Required: 1. Calculate the overhead rates for each department (round to the nearest cent): Cutting: per direct labor hour Printing: per machine hour 2. Calculate the overhead cost per unit…
- Sequential (Step) Method of Support Department Cost Allocation Chekov Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Support Departments Producing Departments HumanResources GeneralFactory Fabricating Assembly Direct costs $165,000 $380,000 $114,200 $90,000 Normal activity: Number of employees — 40 70 150 Square footage 1,800 — 5,500 13,200 The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated on the basis of square footage. Now assume that Chekov Company uses the sequential method to allocate support department costs. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the sequential method. If an amount is zero, enter "0". Use the rounded…Marvin’s Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. A consultant has analyzed the delivery service using activity-based costing methods and identified four activities. Data on these activities follow. Cost Driver VolumeActivityCost DriverCostDriver VolumeProcessing orderNumber of orders$104,0008,000ordersLoading truckNumber of items312,000195,000itemsDelivering merchandiseNumber of orders128,0008,000ordersProcessing invoiceNumber of invoices112,0007,000invoicesTotal overhead$656,000 Two of Marvin's customers are City Diner and Le Chien Chaud. Data for orders and deliveries to these two customers follow. City DinerLe Chien ChaudOrder value$88,000$98,000Number of orders68300Number of items5501,800Number of invoices12200 Required: a. What would the delivery charge for each customer be under the current policy of 10 percent of…A company with two producing departments and two support departments has the following data: Support Departments Producing Departments General Factory Purchasing Power Pesticide Liquid Fertilizer Direct overhead $250,000 $125,000 $70,000 $80,000 $105,000 Square footage 1,600 1,800 3,900 5,450 Machine hours 1,400 1,500 30,000 10,000 Purchase orders 100 5 15 250 125 Use the direct method to allocate the support department costs to the producing departments. (Round allocation percentages to 4 significant digits) Round final answers to nearest dollar except predetermined overhead rates to the nearest cent General factory to Pesticide and Fertilizer, respectively (nearest dollar) Purchasing to Pesticide and Fertilizer, respectively (nearest dollar) Power to Pesticide and Fertilizer, respectively (nearest dollar) using machine hours, compute the departmental predetermined overhead rates for Pesticide and Fertilizer, respectively (nearest cent) 1.…