Keller Company makes two models of battery-operated boats, the Sandy Beach and the Rocky River. Basic production information follows: Sandy Beach Rocky River Direct materials cost per unit $ 19.60 $ 27.00 Direct labor cost per unit 15.00 18.10 Sales price per unit 82.80 105.00 Expected production per month 1,240 units 900 units Keller has monthly overhead of $12,053, which is divided into the following cost pools: Setup costs $ 2,900 Quality control 6,195 Maintenance 2,958 Total $ 12,053 The company has also compiled the following information about the chosen cost drivers: Sandy Beach Rocky River Total Number of setups 11 39 50 Number of inspections 100 425 525 Number of machine hours 1,450 1,450 2,900 Required: 1. Suppose Keller uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.) Overhead Assigned Sandy Beach Model Rocky River Model Total Overhead Cost $0 2. Calculate the production cost per unit for each of Keller’s products under a traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Sandy Beach Rocky River Unit Cost 3. Calculate Keller’s gross margin per unit for each product under the traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Sandy Beach Rocky River Gross Margin
Keller Company makes two models of battery-operated boats, the Sandy Beach and the Rocky River. Basic production information follows: Sandy Beach Rocky River Direct materials cost per unit $ 19.60 $ 27.00 Direct labor cost per unit 15.00 18.10 Sales price per unit 82.80 105.00 Expected production per month 1,240 units 900 units Keller has monthly overhead of $12,053, which is divided into the following cost pools: Setup costs $ 2,900 Quality control 6,195 Maintenance 2,958 Total $ 12,053 The company has also compiled the following information about the chosen cost drivers: Sandy Beach Rocky River Total Number of setups 11 39 50 Number of inspections 100 425 525 Number of machine hours 1,450 1,450 2,900 Required: 1. Suppose Keller uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.) Overhead Assigned Sandy Beach Model Rocky River Model Total Overhead Cost $0 2. Calculate the production cost per unit for each of Keller’s products under a traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Sandy Beach Rocky River Unit Cost 3. Calculate Keller’s gross margin per unit for each product under the traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Sandy Beach Rocky River Gross Margin
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 2MC: TyeDye Lights makes two products: Party and Holiday. It takes 80,900 direct labor hours to...
Related questions
Question
Keller Company makes two models of battery-operated boats, the Sandy Beach and the Rocky River. Basic production information follows:
Sandy Beach | Rocky River | |||||
Direct materials cost per unit | $ | 19.60 | $ | 27.00 | ||
Direct labor cost per unit | 15.00 | 18.10 | ||||
Sales price per unit | 82.80 | 105.00 | ||||
Expected production per month | 1,240 | units | 900 | units | ||
Keller has monthly overhead of $12,053, which is divided into the following cost pools:
Setup costs | $ | 2,900 |
Quality control | 6,195 | |
Maintenance | 2,958 | |
Total | $ | 12,053 |
The company has also compiled the following information about the chosen cost drivers:
Sandy Beach | Rocky River | Total | |
Number of setups | 11 | 39 | 50 |
Number of inspections | 100 | 425 | 525 |
Number of machine hours | 1,450 | 1,450 | 2,900 |
Required:
1. Suppose Keller uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)
|
2. Calculate the production cost per unit for each of Keller’s products under a traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.)
|
3. Calculate Keller’s gross margin per unit for each product under the traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.)
|
4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Keller wanted to implement an ABC system.(Round your answers to 2 decimal places.)
|
set ups, inspections, machine hours
5. Assuming an ABC system, assign overhead costs to each product based on activity demands.(Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)
|
6. Calculate the production cost per unit for each of Keller’s products with an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)
|
7. Calculate Keller’s gross margin per unit for each product under an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)
|
8. Compare the gross margin per unit of each product under the traditional system and ABC. (Round your answers to 2 decimal places.)
|
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning