McCaskey Corporation uses an activity-based costing system with the following threeactivity cost pools:Activity Cost PoolTotal Activitymachine-40,000 hours500 ordersFabricationOrder processingSt54OtherN/AThe Other activity cost pool is used to accumulate costs of idle capacity andorganization-sustaining costs.The company has provided the following data concerning its costs:Wages and salaries $469,000DepreciationOccupancy191,000120,000Total$780,000The distribution of resource consumption across activity cost pools is given below.Activity Cost PoolsOrderFabrication Processing OtherTotalWages and salaries20%60%20%100%DepreciationOccupancy20%25%55%100%20%45%35%100%The activity rate for the Fabrication activity cost pool is closest to:Multiple Choice$2.25 per machine-hour$4.88 per machine-hour

Name: McCaskey Corporation uses an activity-based costing system with the f
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Description: McCaskey Corporation uses an activity-based costing system with the following threeactivity cost pools:Activity Cost PoolTotal Activitymachine-40,000 hours500 ordersFabricationOrder processingSt54OtherN/AThe Other activity cost pool is used to accum

Total cost assigned to fabrication = Total costs x 20% = $780,000 x 20% = $156,000

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McCaskey Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost Pool Total Activity machine- Fabrication Order processing 40,000 hours 500 orders N/A Other The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: Wages and salaries $469,000 191,000 120,000 $780,000 Depreciation Occupancy Total The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Order Fabrication Processing Other 20% Total Wages and salaries Depreciation Occupancy 60% 20% 55% 35% 100% 100% 100% 20% 25% 45% 20% The activity rate for the Fabrication activity cost pool is closest to: Multiple Choice $2.25 per machine-hour $4.88 per machine-hour

McCaskey Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost Pool Total Activity machine- Fabrication Order processing 40,000 hours 500 orders N/A Other The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: Wages and salaries $469,000 191,000 120,000 $780,000 Depreciation Occupancy Total The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Order Fabrication Processing Other 20% Total Wages and salaries Depreciation Occupancy 60% 20% 55% 35% 100% 100% 100% 20% 25% 45% 20% The activity rate for the Fabrication activity cost pool is closest to: Multiple Choice $2.25 per machine-hour $4.88 per machine-hour

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter5: Product And Service Costing: Job-order System

Section: Chapter Questions

Problem 24E: Geneva, Inc., makes two products, X and Y, that require allocation of indirect manufacturing costs....

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Cool Pool has these costs associated with production of 20,000 units of accessory products: direct materials, $70; direct labor, $110; variable manufacturing overhead, $45; total fixed manufacturing overhead, $800,000. What is the cost per unit under both the variable and absorption methods?
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.
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 following product Costs are available for Haworth Company on the production of chairs: direct materials, $15,500; direct labor, $22.000; manufacturing overhead, $16.500; selling expenses, $6,900; and administrative expenses, $15,200. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 7,750 equivalent units are produced, what is the equivalent material cost per unit? If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?
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The following product costs are available for Kellee Company on the production of eyeglass frames: direct materials, $32,125; direct labor, $23.50; manufacturing overhead, applied at 225% of direct labor cost; selling expenses, $22,225; and administrative expenses, $31,125. The direct labor hours worked for the month are 3,200 hours. A. What are the prime costs? B. What are the conversion costs? C. What is the total product cost? D. What is the total period cost? E. If 6.425 equivalent units are produced, what is the equivalent material cost per unit? F. What is the equivalent conversion cost per unit?
Evans, Inc., has a unit-based costing system. Evanss Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity, each product uses about the same labor time and materials. The plant has used direct labor hours for years to assign overhead to products. To help design engineers understand the assumed cost relationships, the Cost Accounting Department developed the following cost equation. (The equation describes the relationship between total manufacturing costs and direct labor hours; the equation is supported by a coefficient of determination of 60 percent.) Y=5,000,000+30X,whereX=directlaborhours The variable rate of 30 is broken down as follows: Because of competitive pressures, product engineering was given the charge to redesign products to reduce the total cost of manufacturing. Using the above cost relationships, product engineering adopted the strategy of redesigning to reduce direct labor content. As each design was completed, an engineering change order was cut, triggering a series of events such as design approval, vendor selection, bill of materials update, redrawing of schematic, test runs, changes in setup procedures, development of new inspection procedures, and so on. After one year of design changes, the normal volume of direct labor was reduced from 250,000 hours to 200,000 hours, with the same number of products being produced. Although each product differs in its labor content, the redesign efforts reduced the labor content for all products. On average, the labor content per unit of product dropped from 1.25 hours per unit to one hour per unit. Fixed overhead, however, increased from 5,000,000 to 6,600,000 per year. Suppose that a consultant was hired to explain the increase in fixed overhead costs. The consultants study revealed that the 30 per hour rate captured the unit-level variable costs; however, the cost behavior of other activities was quite different. For example, setting up equipment is a step-fixed cost, where each step is 2,000 setup hours, costing 90,000. The study also revealed that the cost of receiving goods is a function of the number of different components. This activity has a variable cost of 2,000 per component type and a fixed cost that follows a step-cost pattern. The step is defined by 20 components with a cost of 50,000 per step. Assume also that the consultant indicated that the design adopted by the engineers increased the demand for setups from 20,000 setup hours to 40,000 setup hours and the number of different components from 100 to 250. The demand for other non-unit-level activities remained unchanged. The consultant also recommended that management take a look at a rejected design for its products. This rejected design increased direct labor content from 250,000 hours to 260,000 hours, decreased the demand for setups from 20,000 hours to 10,000 hours, and decreased the demand for purchasing from 100 component types to 75 component types, while the demand for all other activities remained unchanged. Required: 1. Using normal volume, compute the manufacturing cost per labor hour before the year of design changes. What is the cost per unit of an average product? 2. Using normal volume after the one year of design changes, compute the manufacturing cost per hour. What is the cost per unit of an average product? 3. Before considering the consultants study, what do you think is the most likely explanation for the failure of the design changes to reduce manufacturing costs? Now use the information from the consultants study to explain the increase in the average cost per unit of product. What changes would you suggest to improve Evanss efforts to reduce costs? 4. Explain why the consultant recommended a second look at a rejected design. Provide computational support. What does this tell you about the strategic importance of cost management?
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