Required information Acoma Co. has identified one of its cost pools to be quality control and has assigned $239,400 to that pool. Number of inspections has been chosen as the cost driver for this pool; Acoma performs 34,500 inspections annually. Suppose Acoma manufactures two products that consume 20,700 (Product 1) and 13,800 (Product 2) inspections each. Using activity rates, determine the amount of quality control cost to be assigned to each of Acoma's product lines. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.) Product 1 Product 2 Quality Control Costs

Required information Acoma Co. has identified one of its cost pools to be quality control and has assigned $239,400 to that pool. Number of inspections has been chosen as the cost driver for this pool; Acoma performs 34,500 inspections annually. Suppose Acoma manufactures two products that consume 20,700 (Product 1) and 13,800 (Product 2) inspections each. Using activity rates, determine the amount of quality control cost to be assigned to each of Acoma's product lines. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.) Product 1 Product 2 Quality Control Costs

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 4PA: Activity-based product costing Mello Manufacturing Company is a diversified manufacturer that...

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Young Company is beginning operations and is considering three alternatives to allocate manufacturing overhead to individual units produced. Young can use a plantwide rate, departmental rates, or activity-based costing. Young will produce many types of products in its single plant, and not all products will be processed through all departments. In which one of the following independent situations would reported net income for the first year be the same regardless of which overhead allocation method had been selected? a. All production costs approach those costs that were budgeted. b. The sales mix does not vary from the mix that was budgeted. c. All manufacturing overhead is a fixed cost. d. All ending inventory balances are zero.
Pinter Company had the following environmental activities and product information: 1. Environmental activity costs 2. Driver data 3. Other production data Required: 1. Calculate the activity rates that will be used to assign environmental costs to products. 2. Determine the unit environmental and unit costs of each product using ABC. 3. What if the design costs increased to 360,000 and the cost of toxic waste decreased to 750,000? Assume that Solvent Y uses 6,000 out of 12,000 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 14,250 of 15,000 pounds of toxic waste. What is the new environmental cost for Solvent Y?
Jameson Company produces paper towels. The company has established the following direct materials and direct labor standards for one case of paper towels: During the first quarter of the year, Jameson produced 45,000 cases of paper towels. The company purchased and used 135,700 pounds of paper pulp at 0.38 per pound. Actual direct labor used was 91,000 hours at 12.10 per hour. Required: 1. Calculate the direct materials price and usage variances. 2. Calculate the direct labor rate and efficiency variances. 3. Prepare the journal entries for the direct materials and direct labor variances. 4. Describe how flexible budgeting variances relate to the direct materials and direct labor variances computed in Requirements 1 and 2.
Anderson Company has the following departmental manufacturing structure for one of its products: After some study, the production manager of Anderson recommended the following revised cellular manufacturing approach: Required: 1. Calculate the total time it takes to produce a batch of 20 units using Andersons traditional departmental structure. 2. Using cellular manufacturing, how much time is saved producing the same batch of 20 units? Assuming the cell operates continuously, what is the production rate? Which process controls this production rate? 3. What if the processing times of molding, welding, and assembly are all reduced to six minutes each? What is the production rate now, and how long will it take to produce a batch of 20 units?
Medical Tape makes two products: Generic and Label. It estimates it will produce 423,694 units of Generic and 652,200 of Label, and the overhead for each of its cost pools is as follows: It has also estimated the activities for each cost driver as follows: How much is the overhead allocated to each unit of Generic and Label?
USD Inc. has established the following standard cost per unit: Although 10,000 units were budgeted, 12,000 units were produced. The Purchasing department bought 50,000 lb of materials at a cost of $237,500. Actual pounds of materials used were 46,000. Direct labor cost was $287,500 for 25,000 hours worked. Required: Make journal entries to record the materials transactions, assuming that the materials price variance was recorded at the time of purchase. Make journal entries to record the labor variances.
Botella Company produces plastic bottles. The unit for costing purposes is a case of 18 bottles. The following standards for producing one case of bottles have been established: During December, 78,000 pounds of materials were purchased and used in production. There were 15,000 cases produced, with the following actual prime costs: Required: 1. Compute the materials variances. 2. Compute the labor variances. 3. CONCEPTUAL CONNECTION What are the advantages and disadvantages that can result from the use of a standard costing system?
Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year: Silven produces two models of cell phones with the following expected activity demands: 1. Determine the total overhead assigned to each product using the four activity drivers. 2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs. 3. Using ABC as the benchmark, calculate the percentage error and comment on the accuracy of the reduced system. Explain why this approach may be desirable.
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?
Carlo Lee Corp. has established the following standard cost per unit: Although 10,000 units were budgeted, only 8,800 units were produced. The purchasing department bought 55,000 lb of materials at a cost of $123,750. Actual pounds of materials used were 54,305. Direct labor cost was $186,550 for 18,200 hours worked. Required: Make journal entries to record the materials transactions, assuming that the materials price variance was recorded at the time of purchase. Make journal entries to record the labor variances.
At the beginning of the year, Lopez Company had the following standard cost sheet for one of its chemical products: Lopez computes its overhead rates using practical volume, which is 80,000 units. The actual results for the year are as follows: (a) Units produced: 79,600; (b) Direct labor: 158,900 hours at 18.10; (c) FOH: 831,000; and (d) VOH: 112,400. Required: 1. Compute the variable overhead spending and efficiency variances. 2. Compute the fixed overhead spending and volume variances.
April Industries employs a standard costing system in the manufacturing of its sole product, a park bench. They purchased 60,000 feet of raw material for $300,000, and it takes S feet of raw materials to produce one park bench. In August, the company produced 10,000 park benches. The standard cost for material output was $100,000, and there was an unfavorable direct materials quantity variance of $6,000. A. What is April Industries standard price for one unit of material? B. What was the total number of units of material used to produce the August output? C. What was the direct materials price variance for August?