P13-2 Missouri Company produces two products: Hardware X and Accessory Y. Missouri curently uses a normal cost system in which overhead costs are allocated to products based on direct labor hours. Missouri will be installing new cost accounting software hy end of the current year and it is also considering to adopt the activity-based costing to charge overhead to products instead of using the firm-wide overhead rate that it currently uses. For the fiscal year 2016, Missouri forecasted to produce 5,000 units of Hardware X and 4,000 units of Accessory Y. The production of each hardware requires two direct labor hours and each accessory requires one-half hour. Below is the prime costs included in the each product: Hardware X Accessory Y Direct materials per unit Direct labor per unit P40 P16 P20 P4 Total estimated factory overhead for 2016 is shown below: Budgeted Estimated overhead Volume Machine setups Material handling Packaging and shipping P 90,000 20 setups 140,000 4,000 lbs. 190,000 500 boxes P420,000 Total Based on the analysis of the above overhead activities, it was estimated that the two products would require the following: Hardware X Accessory Y 6 setups 1,000 lbs, 400 boxes Total Machine setups Material handling Packaging and shipping 14 setups • 20 setups 3,000 lbs. 100 boxes 4,000 lbs. 500 boxes a. Unit cost of Hardware X and Accessory Y using a plant-wide overhead rate based on direct labor hours. Required: Calculate the following: D. Activity cost rates for (a) machine setups, (b) material handling and (c) packaging and shipping. C. Onit cost of Hardware X and Accessory Y using the activity-based costing system.
P13-2 Missouri Company produces two products: Hardware X and Accessory Y. Missouri curently uses a normal cost system in which overhead costs are allocated to products based on direct labor hours. Missouri will be installing new cost accounting software hy end of the current year and it is also considering to adopt the activity-based costing to charge overhead to products instead of using the firm-wide overhead rate that it currently uses. For the fiscal year 2016, Missouri forecasted to produce 5,000 units of Hardware X and 4,000 units of Accessory Y. The production of each hardware requires two direct labor hours and each accessory requires one-half hour. Below is the prime costs included in the each product: Hardware X Accessory Y Direct materials per unit Direct labor per unit P40 P16 P20 P4 Total estimated factory overhead for 2016 is shown below: Budgeted Estimated overhead Volume Machine setups Material handling Packaging and shipping P 90,000 20 setups 140,000 4,000 lbs. 190,000 500 boxes P420,000 Total Based on the analysis of the above overhead activities, it was estimated that the two products would require the following: Hardware X Accessory Y 6 setups 1,000 lbs, 400 boxes Total Machine setups Material handling Packaging and shipping 14 setups • 20 setups 3,000 lbs. 100 boxes 4,000 lbs. 500 boxes a. Unit cost of Hardware X and Accessory Y using a plant-wide overhead rate based on direct labor hours. Required: Calculate the following: D. Activity cost rates for (a) machine setups, (b) material handling and (c) packaging and shipping. C. Onit cost of Hardware X and Accessory Y using the activity-based costing system.
Managerial Accounting: The Cornerstone of Business Decision-Making
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Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
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Chapter9: Profit Planning And Flexible Budgets
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Transcribed Image Text:currently uses a normal cost system in which overhead costs are allocated to products
P13-2 Missouri Company produces two products: Hardware X and Accessory Y. Missouri
nased on direct labor hours. Missouri will be installing new cost accounting software
by end of the current year and it is also considering to adopt the activity-based costing
to charge overhead to products instead of using the firm-wide overhead rate that it
currently uses.
For the fiscal year 2016, Missouri forecasted to produce 5,000 units of Hardware X and
4,000 units of Accessory Y. The production of each hardware requires two direct labor
hours and each accessory requires one-half hour. Below is the prime costs included in
the each product:
Hardware X Accessory Y
Direct materials per unit
P40
P16
Direct labor per unit
P20
P4
Total estimated factory overhead for 2016 is shown below:
Budgeted
overhead
Estimated
Volume
P 90,000 20 setups
140,000 4,000 Ibs.
190,000 500 boxes
Machine setups
Material handling
Packaging and shipping
Total
P420,000
Based on the analysis of the above overhead activities, it was estimated that
the two products would require the following:
Machine setups
Material handling
Packaging and shipping
Hardware X Accessory Y
6 setups
1,000 lbs.
400 boxes
Total
14 setups • 20 setups
4,000 lbs.
500 boxes
3,000 lbs.
100 boxes
a. Unit cost of Hardware X and Accessory Y using a plant-wide overhead rate based
on direct labor hours.
Required: Calculate the following:
D. Activity cost rates for (a) machine setups, (b) material handling and (c) packaging
and shipping.
C.
Unit cost of Hardware X and Accessory Y using the activity-based costing system.
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