Marvin's Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies to cover he 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. Activity Processing order Loading truck Delivering merchandise Processing invoice Total overhead Cost Driver Number of orders Number of items Number of orders Number of invoices. Order value Number of orders Number of items Number of invoices. 53 800 13 Cost Driver Volume Two of Marvin's customers are City Diner and Le Chien Chaud. Data for orders and deliveries to these two customers follow. City Diner Le Chien Chaud $73,000 $83,000 150 1,900 190 Cost $ 90,000 180,000 108,000 90,000 $468,000 Driver Volume 6,000 orders 120,000 items 6,000 orders 5,000 invoices Required: . What would the delivery charge for each customer be under the current policy of 10 percent of order value? . Calculate the cost of each activity for both restaurants to determine the total activity-based costing estimate of the cost of deliverin o each customer.

Marvin's Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies to cover he 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. Activity Processing order Loading truck Delivering merchandise Processing invoice Total overhead Cost Driver Number of orders Number of items Number of orders Number of invoices. Order value Number of orders Number of items Number of invoices. 53 800 13 Cost Driver Volume Two of Marvin's customers are City Diner and Le Chien Chaud. Data for orders and deliveries to these two customers follow. City Diner Le Chien Chaud $73,000 $83,000 150 1,900 190 Cost $ 90,000 180,000 108,000 90,000 $468,000 Driver Volume 6,000 orders 120,000 items 6,000 orders 5,000 invoices Required: . What would the delivery charge for each customer be under the current policy of 10 percent of order value? . Calculate the cost of each activity for both restaurants to determine the total activity-based costing estimate of the cost of deliverin o each customer.

Name: Please help with the attached question Number of invoices13Required:a.
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Description: Please help with the attached question Number of invoices13Required:a. What would the delivery charge for each customer be under the current policy of 10 percent of order value?b. Calculate the cost of each activity for both restaurants to determine

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 4BE: Activity-based costing: selling and administrative expenses Jungle Junior Company manufactures and...

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Ventana Window and Wall Treatments Company provides draperies, shades, and various window treatments. Ventana works with the customer to design the appropriate window treatment, places the order, and installs the finished product. Direct materials and direct labor costs are easy to trace to the jobs. Ventanas income statement for last year is as follows: Ventana wants to find a markup on cost of goods sold that will allow them to earn about the same amount of profit on each job as was earned last year. Required: 1. What is the markup on cost of goods sold (COGS) that will maintain the same profit as last year? (Round the percentage to two significant digits.) 2. A customer orders draperies and shades for a remodeling job. The job will have the following costs: What is the price that Ventana will quote given the markup percentage calculated in Requirement 1? (Round the price to the nearest dollar.) 3. What if Ventana wants to calculate a markup on direct materials cost, since it is the largest cost of doing business? What is the markup on direct materials cost that will maintain the same profit as last year? (Round the percentage to two significant digits.) What is the bid price Ventana will use for the job given in Requirement 2 if the markup percentage is calculated on the basis of direct materials cost? (Round to the nearest dollar.)
Mott Company recently implemented a JIT manufacturing system. After one year of operation, Heidi Burrows, president of the company, wanted to compare product cost under the JIT system with product cost under the old system. Motts two products are weed eaters and lawn edgers. The unit prime costs under the old system are as follows: Under the old manufacturing system, the company operated three service centers and two production departments. Overhead was applied using departmental overhead rates. The direct overhead costs associated with each department for the year preceding the installation of JIT are as follows: Under the old system, the overhead costs of the service departments were allocated directly to the producing departments and then to the products passing through them. (Both products passed through each producing department.) The overhead rate for the Machining Department was based on machine hours, and the overhead rate for assembly was based on direct labor hours. During the last year of operations for the old system, the Machining Department used 80,000 machine hours, and the Assembly Department used 20,000 direct labor hours. Each weed eater required 1.0 machine hour in Machining and 0.25 direct labor hour in Assembly. Each lawn edger required 2.0 machine hours in Machining and 0.5 hour in Assembly. Bases for allocation of the service costs are as follows: Upon implementing JIT, a manufacturing cell for each product was created to replace the departmental structure. Each cell occupied 40,000 square feet. Maintenance and materials handling were both decentralized to the cell level. Essentially, cell workers were trained to operate the machines in each cell, assemble the components, maintain the machines, and move the partially completed units from one point to the next within the cell. During the first year of the JIT system, the company produced and sold 20,000 weed eaters and 30,000 lawn edgers. This output was identical to that for the last year of operations under the old system. The following costs have been assigned to the manufacturing cells: Required: 1. Compute the unit cost for each product under the old manufacturing system. 2. Compute the unit cost for each product under the JIT system. 3. Which of the unit costs is more accurate? Explain. Include in your explanation a discussion of how the computational approaches differ. 4. Calculate the decrease in overhead costs under JIT, and provide some possible reasons that explain the decrease.
Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?
Sweet Dreams Bakery was started five years ago by Della Fontera who was known for her breads, sweet rolls, and personalized cakes. Della had kept her accounting system simple, believing that she had a good intuitive handle on costs. She had been using the following formula to describe her monthly overhead costs: Overhead cost = 7,800 + 7.50 (direct labor hours) For breads and sweet rolls that were available in the bakery case each day, she applied a standard pricing system. For special orders, however, Della needed her cost formula to help her come up with an estimated cost for the personalized cake or wedding cake. To that cost, she applied a markup percentage. Lately, however, the increase in the variety of orders and the elaborateness of the wedding cakes made her wonder if a more sophisticated view of costs would help her in planning, budgeting, and pricing. After some late-night discussions with her workers, Della determined that Sweet Dreams expansion into wedding cakes and gift baskets had made special orders a more complex operation. The various shapes of the wedding cake tiers had required Dellas investing in different- sized cake pans, as well as decorating tips for icing. The different icing patterns and elaborate designs took much more time for icing, as well. In addition, while a five-year-olds birthday cake just requires that the childs name and (possibly) the superheros name are spelled correctly, a wedding cake is a once-in-a-lifetime item that must achieve perfection. (Della hated to use the term bridezilla but.) Gift baskets required Della to stock baskets, cellophane, and bows. Then when an order came in, a worker had to stop baking to arrange the muffins and breads artfully in the basket, wrap it, and tie the bow. While it seemed simple enough, this took time and thought. Thus, the number of direct labor hours was still an important variable, but so were the number of wedding cakes and gift baskets. Della rummaged through her college textbooks and found information on regression. Then, with help from one of her computer savvy workers, she ran multiple regression tables for the past 24 months of data for Sweet Dreams for three independent variables: number of direct labor hours, the number of wedding cakes, and the number of gift baskets. The following printout was obtained: Required: 1. Write out the cost equation for Sweet Dreams monthly overhead cost. 2. Suppose that next month Sweet Dreams expects to have 550 direct labor hours, 35 wedding cakes, and 20 gift baskets. What is the expected overhead? (Round to the nearest dollar.) 3. What does R2 mean in this equation? Overall, what is your evaluation of the cost equation that was developed for the cost of overhead? Suppose that Sweet Dreams charges an extra 2.50 to prepare a gift basket. This charge is in addition to the price charged for the items (e.g., muffins) that the customer chooses to put into the basket. How might Della use the results of the regression equation to see whether or not the 2.50 charge is appropriate?
Thayne Company has 30 clerks that work in its Accounts Payable Department. A study revealed the following activities and the relative time demanded by each activity: Required: Classify the four activities as value-added or non-value-added, and calculate the clerical cost of each activity. For non-value-added activities, indicate why they are non-value-added.
Kenkel, Ltd. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 80,000. b. Requisitioned raw materials to production, 80,000. c. Distributed direct labor costs, 10,000. d. Factory overhead costs incurred, 60,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 225,000, on account.
Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Ingles, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 16 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40 percent of next months sales are in the finished goods inventory. Ingles also purchases sufficient materials to ensure that materials inventory is 60 percent of the following months scheduled production. Ingless sales budget in units for the next quarter is as follows: Ingless ending inventories in units for July 31 are as follows: Required: 1. Calculate the number of tables to be produced during August. 2. Disregarding your response to Requirement 1, assume the required production units for August and September are 2,100 and 1,900, respectively, and the July 31 materials inventory is 4,000 units. Compute the number of table legs to be purchased in August. 3. Assume that Ingles Corporation will produce 2,340 units in September. How many employees will be required for the Assembly Department in September? (Fractional employees are acceptable since employees can be hired on a part-time basis. Assume a 40-hour week and a 4-week month.) (CMA adapted)
Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is: Previously, Sanjay Bhatt, Firenza Companys controller, had applied overhead on the basis of machine hours. Expected machine hours for the coming year are 50,000. Sanjay has been reading about activity-based costing, and he wonders whether or not it might offer some advantages to his company. He decided that appropriate drivers for overhead activities are purchase orders for purchasing, number of setups for setup cost, engineering hours for engineering cost, and machine hours for other. Budgeted amounts for these drivers are 5,000 purchase orders, 500 setups, and 2,500 engineering hours. Sanjay has been asked to prepare bids for two jobs with the following information: The typical bid price includes a 40 percent markup over full manufacturing cost. Required: 1. Calculate a plantwide rate for Firenza Company based on machine hours. What is the bid price of each job using this rate? 2. Calculate activity rates for the four overhead activities. What is the bid price of each job using these rates? 3. Which bids are more accurate? Why?
Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is currently produced internally. The supplier has offered to sell the track assembly for 66 per unit. Brees is currently using a traditional, unit-based costing system that assigns overhead to jobs on the basis of direct labor hours. The estimated traditional full cost of producing the track assembly is as follows: Prior to making a decision, the companys CEO commissioned a special study to see whether there would be any decrease in the fixed overhead costs. The results of the study revealed the following: 3 setups1,160 each (The setups would be avoided, and total spending could be reduced by 1,160 per setup.) One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is 12,300 and could be totally avoided if the part were purchased. Engineering work: 470 hours, 45/hour. (Although the work decreases by 470 hours, the engineer assigned to the track assembly line also spends time on other products, and there would be no reduction in his salary.) 75 fewer material moves at 30 per move. Required: 1. Ignore the special study, and determine whether the track assembly should be produced internally or purchased from the supplier. 2. Now, using the special study data, repeat the analysis. 3. Discuss the qualitative factors that would affect the decision, including strategic implications. 4. After reviewing the special study, the controller made the following remark: This study ignores the additional activity demands that purchasing would cause. For example, although the demand for inspecting the part on the production floor decreases, we may need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs? Is the controller right?
Davis Co. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 70,000. b. Requisitioned raw materials to production, 70,000. c. Distributed direct labor costs, 15,000. d. Factory overhead costs incurred, 45,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 195,000, on account. (Hint: Use a single account for raw materials and work in process.)
The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the profitability of a product line by comparing revenues to the cost of goods sold. However, Barry White, the firms new accountant, wants to use an activity-based costing system that takes into consideration the cost of the delivery person. Following are activity and cost information relating to two of Chocolate Bakers major products: Using activity-based costing, which of the following statements is correct? a. The muffins are 2,000 more profitable. b. The cheesecakes are 75 more profitable. c. The muffins are 1,925 more profitable. d. The muffins have a higher profitability as a percentage of sales and, therefore, are more advantageous.
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.