Potterii sells its products to large box stores and recently added a retail line of products to sell directly to consumers. These estimates are to be used in determining the overhead allocation rate for ABC: Estimated Cost Pool Cost Driver Overhead Wholesale Retail Ordering Number of Orders $88,000 180,000 40,000 Machine Setups Number of Setups 102,000 200,000 140,000 Inspection Number of Inspections 54,000 40,000 14,000 What would be the predetermined rate for each cost pool? Round "Rate" answers to two decimal places. Estimated Total Overhead Activity Rate Cost Pool Cost Driver per order Number of Orders $88,000 Ordering per setup 102,000 Machine Setups Number of Setups per inspection 54,000 Number of Inspections Inspection

Potterii sells its products to large box stores and recently added a retail line of products to sell directly to consumers. These estimates are to be used in determining the overhead allocation rate for ABC: Estimated Cost Pool Cost Driver Overhead Wholesale Retail Ordering Number of Orders $88,000 180,000 40,000 Machine Setups Number of Setups 102,000 200,000 140,000 Inspection Number of Inspections 54,000 40,000 14,000 What would be the predetermined rate for each cost pool? Round "Rate" answers to two decimal places. Estimated Total Overhead Activity Rate Cost Pool Cost Driver per order Number of Orders $88,000 Ordering per setup 102,000 Machine Setups Number of Setups per inspection 54,000 Number of Inspections Inspection

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 33P: Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs...

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Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs for the past 10 months. Nizam Sanjay, a member of the controllers department, believes that overhead activities and costs should be classified into groups that have the same driver. He has decided that unloading incoming goods, counting goods, and inspecting goods can be grouped together as a more general receiving activity, since these three activities are all driven by the number of receiving orders. The 10 months of data shown below have been gathered for the receiving activity. Required: 1. Prepare a scattergraph, plotting the receiving costs against the number of purchase orders. Use the vertical axis for costs and the horizontal axis for orders. 2. Select two points that make the best fit, and compute a cost formula for receiving costs. 3. Using the high-low method, prepare a cost formula for the receiving activity. 4. Using the method of least squares, prepare a cost formula for the receiving activity. What is the coefficient of determination?
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?
Potterii sells its products to large box stores and recently added a retail line of products to sell directly to consumers. These estimates are to be used in determining the overhead allocation rate for ABC: Cost Pool Cost Driver Estimated Overhead Wholesale Retail Ordering Number of orders $120,000 $180,000 $60,000 Machine setups Number of setups $85,000 $200,000 $140,000 Inspection Number of inspections $75,000 $60,000 $15,000 What would be the predetermined rate for each cost pool? a. Ordering b. Machine setups c. Inspection
BiskBisk Tiles is a small distributor of marble tiles. BiskBisk identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2019 Activity Cost Driver Quantity of Cost Driver Cost per Unit of Cost Driver 1. Placing and paying for orders of marble tiles Number of orders 900 $80 per order 2. Receiving and storage Loads moved 4,100 $50 per load 3. Shipping of marble tiles to retailers Number of shipments 2,500 $40 per shipment For 20192019, BiskBisk buys 230 comma 000230,000 marble tiles at an average cost of $ 2$2 per tile and sells them to retailers at an average price of $ 7$7 per tile. Assume BiskBisk has no fixed costs and no inventories. 1. Calculate BiskBisk's operating income for 20192019. 2. For 20202020, retailers are demanding a 55% discount off the 20192019 price. BiskBisk's suppliers are only willing to…
Caldwell Supply, a wholesaler, has determined thats its operations have three primary activities- purchasing, warehousing, and distributing. The firm reports the following operational data for the year just compelted: Activity Cost Driver Quanity of Cost Driver Cost Per Unit of Cost Driver Purchasing # of purchase orders 1,160 $166 per order Warehousing # of moves 8,500 $35 per move Distributing # of shipments 660 $96per shipment Caldwell buys 101,600 units at an average unit cost of $15 and sells them at an average unit price of $25. The firm also has fixed operating costs of $251,600 for the year. Caldwels customers are demanding a 15% discount for the coming year. The company expects to the sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 8% discount. Required: 1. Caldwell has estimated that it can reduce the number of purschase orders to 840 and can decrease the cost of each shipment by $19…
Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Activity Cost Driver Quantity of Cost Driver Cost per Unit of Cost Driver Purchasing Number of purchase orders 1,060 $156 per order Warehousing Number of moves 8,600 $36 per move Distributing Number of shipments 560 $86 per shipment Caldwell buys 100,600 units at an average unit cost of $16 and sells them at an average unit price of $26. The firm also has fixed operating costs of $250,600 for the year. Caldwell’s customers are demanding a 16% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell’s suppliers, however, are willing to give only a 10% discount. Required:Caldwell has estimated that it can reduce the number of purchase orders to 740 and can…
Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours. In the most recent month, 120,000 items were shipped to customers using 2,300 direct labor-hours. The company incurred a total of $7,360 in variable overhead costs. According to the company’s standards, 0.02 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.25 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 120,000 items to customers? 2. What is the standard variable overhead cost allowed (SH × SR) to ship 120,000 items to customers? 3. What is the variable overhead spending…
Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours. In the most recent month, 110,000 items were shipped to customers using 3,500 direct labor-hours. The company incurred a total of $9,450 in variable overhead costs. According to the company’s standards, 0.03 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $2.75 per direct labor-hour. Required: 4. What is the variable overhead rate variance and the variable overhead efficiency variance? (For requirements 3 and 4, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no…
Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours. In the most recent month, 170,000 items were shipped to customers using 7,100 direct labor-hours. The company incurred a total of $23,430 in variable overhead costs. According to the company’s standards, 0.03 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.35 per direct labor-hour. Required: What is the standard labor-hours allowed (SH) to ship 170,000 items to customers? What is the standard variable overhead cost allowed (SH × SR) to ship 170,000 items to customers? What is the variable overhead spending variance? What…
Deeds Company sells custom-made machine parts to industrial equipment manufacturers by bidding cost plus 40 percent, where cost is defined as manufacturing cost plus order processing cost. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Cost and sales information by customer category is provided below. Frequently OrderingCustomers Less FrequentlyOrdering Customers Sales orders 41,000 4,100 Order size 15 150 Average unit manufacturing cost $40 $40 Order-processing activity costs:     Processing sales orders $2,878,500 Order-filling capacity is purchased in steps (order-processing clerks) of 1,000, each step costing $43,000; variable order-filling activity costs are $35 per order. The activity capacity is 55,000 orders; thus, the total order-filling cost is $3,943,500 [(55 steps × $43,000) + ($35 × 45,100)]. Current practice…
Deeds Company sells custom-made machine parts to industrial equipment manufacturers by bidding cost plus 40 percent, where cost is defined as manufacturing cost plus order processing cost. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Cost and sales information by customer category is provided below. Frequently OrderingCustomers Less FrequentlyOrdering Customers Sales orders 41,000 4,100 Order size 15 150 Average unit manufacturing cost $40 $40 Order-processing activity costs:     Processing sales orders $2,878,500 Order-filling capacity is purchased in steps (order-processing clerks) of 1,000, each step costing $43,000; variable order-filling activity costs are $35 per order. The activity capacity is 55,000 orders; thus, the total order-filling cost is $3,943,500 [(55 steps × $43,000) + ($35 × 45,100)]. Current practice…
Deeds Company sells custom-made machine parts to industrial equipment manufacturers by bidding cost plus 40 percent, where cost is defined as manufacturing cost plus order processing cost. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Cost and sales information by customer category is provided below. Frequently OrderingCustomers Less FrequentlyOrdering Customers Sales orders 41,000 4,100 Order size 15 150 Average unit manufacturing cost $40 $40 Order-processing activity costs:     Processing sales orders $2,878,500 Order-filling capacity is purchased in steps (order-processing clerks) of 1,000, each step costing $43,000; variable order-filling activity costs are $35 per order. The activity capacity is 55,000 orders; thus, the total order-filling cost is $3,943,500 [(55 steps × $43,000) + ($35 × 45,100)]. Current practice…