Northwest Company produces two types of glass shelving: rounded edge and squared edge. The company reports the following cost data. Rounded Edge $ 34,800 11,600 Squared Edge $ 46,800 $ 81,600 31,200 Total Direct materials Direct labor Overhead (using plantwide rate) 42,800 41,400 79,400 120,800 $ 87,800 $ 245,200 Total product cost 157,400 11,600 $ 7.57 15,600 $ 10.09 Units produced Product cost per unit Northwest's controller wants to apply activity-based costing to allocate the $120,800 of overhead cost to the two products to see whether product cost per unit would change markedly from that above. The company's budgeted activity usage equals its actual activity usage for the period. The following additional information is collected. Activity Cost Driver Purchase orders Rounded Edge 149 orders Activity Usage Squared Edge 471 orders Budgeted Cost Activity Purchasing Depreciation of machinery Setup Total 620 orders $ 6,200 63,000 Machine hours 500 hours 1,500 hours 2,000 hours 51,600 Setups 40 setups 210 setups 250 setups 2$ 120,800 Total Required: 1. Compute the activity rate for each activity using activity-based costing. 2. Compute overhead cost per unit for each of the two products using activity-based costing. 3. Determine product cost per unit for each of the two products using activity-based costing.
Northwest Company produces two types of glass shelving: rounded edge and squared edge. The company reports the following cost data. Rounded Edge $ 34,800 11,600 Squared Edge $ 46,800 $ 81,600 31,200 Total Direct materials Direct labor Overhead (using plantwide rate) 42,800 41,400 79,400 120,800 $ 87,800 $ 245,200 Total product cost 157,400 11,600 $ 7.57 15,600 $ 10.09 Units produced Product cost per unit Northwest's controller wants to apply activity-based costing to allocate the $120,800 of overhead cost to the two products to see whether product cost per unit would change markedly from that above. The company's budgeted activity usage equals its actual activity usage for the period. The following additional information is collected. Activity Cost Driver Purchase orders Rounded Edge 149 orders Activity Usage Squared Edge 471 orders Budgeted Cost Activity Purchasing Depreciation of machinery Setup Total 620 orders $ 6,200 63,000 Machine hours 500 hours 1,500 hours 2,000 hours 51,600 Setups 40 setups 210 setups 250 setups 2$ 120,800 Total Required: 1. Compute the activity rate for each activity using activity-based costing. 2. Compute overhead cost per unit for each of the two products using activity-based costing. 3. Determine product cost per unit for each of the two products using activity-based costing.
Chapter5: Process Costing
Section: Chapter Questions
Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...
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Concept explainers
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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Question
Transcribed Image Text:Northwest Company produces two types of glass shelving: rounded edge and squared edge. The company reports the
following cost data.
Rounded
Edge
$ 34,800
11,600
Squared
Edge
$ 46,800 $ 81,600
31,200
Total
Direct materials
Direct labor
Overhead (using
plantwide rate)
42,800
41,400
79,400
120,800
$
245, 200
$
Total product cost
$ 87,800
157,400
Units produced
Product cost per unit
11,600
$ 7.57
15,600
$ 10.09
Northwest's controller wants to apply activity-based costing to allocate the $120,800 of overhead cost to the two
products to see whether product cost per unit would change markedly from that above. The company's budgeted
activity usage equals its actual activity usage for the period. The following additional information is collected.
Budgeted
Cost
$ 6,200
Activity Cost
Driver
Purchase orders
Activity Usage
Squared
Edge
471 orders
Rounded
Activity
Purchasing
Depreciation of
machinery
Setup
Edge
149 orders
Total
620 orders
63,000
Machine hours
500 hours 1,500 hours
2,000 hours
51,600
2$
120,800
Setups
40 setups
210 setups
250 setups
Total
Required:
1. Compute the activity rate for each activity using activity-based costing.
2. Compute overhead cost per unit for each of the two products using activity-based costing.
3. Determine product cost per unit for each of the two products using activity-based costing.
Complete this question by entering your answers in the tabs below.
Required Required Required
1
2
Determine product cost per unit for each of the two products using activity-based costing.
(Round intermediate calculations and final answers to 2 decimal places.)
Direct
Materials
Product Cost
Per Unit
Direct Labor
Overhead
per Unit
Rounded
Edge
Squared
Edge
< Required 2
Required 3>
Expert Solution
Step 1
Activity based costing is one of the costing system under which all indirect costs and overhead costs will be allocated to the products on the basis of activities and their related cost drivers.
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