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Requirement 1. Classify each of the costs as output-unit-level, batch-level, output-sustaining, or organisation-sustaining. Explain each answer. Cost Item a. Indirect production labour costs such as supervision that supports direct production labour, $935,000 b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000 Cost of indirect materials, $234,000 C. d. Costs incurred to set up machines each time a different product needs to be produced, $392,000 e. Designing processes, drawing process charts, making ongineering process changes for products, $236,900 Machine-related overhead costs such as depreciation, maintenance, production engineering, $865,000 (These resources relate to the activity of running the machines.) f. . Factory management, rent and insurance, $498,000

Requirement 1. Classify each of the costs as output-unit-level, batch-level, output-sustaining, or organisation-sustaining. Explain each answer. Cost Item a. Indirect production labour costs such as supervision that supports direct production labour, $935,000 b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000 Cost of indirect materials, $234,000 C. d. Costs incurred to set up machines each time a different product needs to be produced, $392,000 e. Designing processes, drawing process charts, making ongineering process changes for products, $236,900 Machine-related overhead costs such as depreciation, maintenance, production engineering, $865,000 (These resources relate to the activity of running the machines.) f. . Factory management, rent and insurance, $498,000

Principles of Cost Accounting
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter2: Accounting For Materials
Section: Chapter Questions
Problem 17E: Davis Co. uses backflush costing to account for its manufacturing costs. The trigger points are the...
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Answer all the requirements 1,2,2,3.if answered in 45mins,it would be appreciable

Requirement 1. Classify each of the costs as output-unit-level, batch-level, output-sustaining, or organisation-sustaining. Explain each answer. Cost-type Cost Item Indirect production labour costs such as supervision that supports direct production labour, $935,000 a. b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000 Batch-level Cost of indirect materials, $234,000 Facility-sustaining C. Output unit-level d. Costs incurred to set up machines each time a different product needs to be produced, $392,000 Designing processes, drawing process charts, making engineering process changes for products, $236,900 e. Product-sustaining f. Machine-related overhead costs such as depreciation, maintenance, production engineering, $865,000 (These resources relate to the activity of running the machines.) g. Factory management, rent and insurance, $498,000 Output unit-level costs are Batch-level costs are Facility-sustaining costs are Product-sustaining costs are ake and is produced in many batches. The other machine, designed for home nachine and allocates all overhead costs using machine-hours as the only Requirement 2. Consider two use, is simple to make and is cost-driver. Explain how, if at costs that cannot be traced to individual products but support the company as a whole. costs used to support individual products regardless of the number of units or batches tested. related to a group of units of the product. They are not related to the number of units tested. Click to select your answer. related to the number of units tested; required for each unit tested. Requirement 2. Consider two types of machines made by Ellipse Ltd. One machine, designed for professional use, is complex to make and is produced in many batches. The other machine, designed for home use, is simple to make and is produced in few batches. Ellipse Ltd needs the same number of machine-hours to make each type of machine and allocates all overhead costs using machine-hours as the only cost-driver. Explain how, if at all, incorrect costs might result. batches. In addition, the V batches will use V batch-level overhead resources compared to the simple elliptical machine that is made in The complex elliptical machine made in complex machine will use V overhead resources because it is complex. Because Vif Ellipse uses only machine-hours to allocate overhead costs to elliptical machines. both the simple and the complex machines will be allocated the same amount of overhead costs per machine the complex karaoke machine will be allocated a greater amount of overhead costs per machine than the simple machine the simple machine will be allocated a greater amount of overhead costs per machine than the complex machine 中 開1329 HLpoU uses Uy a -IUUIS IU duLdie uveTRUau USIS IU Gpar a v and the simple machine will be As a result, the complex elliptical machine will be Requirement 3. How is the activity-hierarchy helpful to Ellipse Ltd in managing its business? The activity-hierarchy can be helpful to Ellipse Ltd in managing its business through: O A. Reducing the number of indirect cost pools, creating less homogeneous indirect cost pools, allocating more indirect costs to cost objects and identifying cost objects at the output unit-level. O B. Identifying the cost benefit of implementing a simple costing system. O C. Pricing and product mix decisions, cost reduction and process improvement decisions, design decisions, and planning and managing activities. O D. All of the above. Click to select your answer.
Transcribed Image Text:Requirement 1. Classify each of the costs as output-unit-level, batch-level, output-sustaining, or organisation-sustaining. Explain each answer. Cost-type Cost Item Indirect production labour costs such as supervision that supports direct production labour, $935,000 a. b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000 Batch-level Cost of indirect materials, $234,000 Facility-sustaining C. Output unit-level d. Costs incurred to set up machines each time a different product needs to be produced, $392,000 Designing processes, drawing process charts, making engineering process changes for products, $236,900 e. Product-sustaining f. Machine-related overhead costs such as depreciation, maintenance, production engineering, $865,000 (These resources relate to the activity of running the machines.) g. Factory management, rent and insurance, $498,000 Output unit-level costs are Batch-level costs are Facility-sustaining costs are Product-sustaining costs are ake and is produced in many batches. The other machine, designed for home nachine and allocates all overhead costs using machine-hours as the only Requirement 2. Consider two use, is simple to make and is cost-driver. Explain how, if at costs that cannot be traced to individual products but support the company as a whole. costs used to support individual products regardless of the number of units or batches tested. related to a group of units of the product. They are not related to the number of units tested. Click to select your answer. related to the number of units tested; required for each unit tested. Requirement 2. Consider two types of machines made by Ellipse Ltd. One machine, designed for professional use, is complex to make and is produced in many batches. The other machine, designed for home use, is simple to make and is produced in few batches. Ellipse Ltd needs the same number of machine-hours to make each type of machine and allocates all overhead costs using machine-hours as the only cost-driver. Explain how, if at all, incorrect costs might result. batches. In addition, the V batches will use V batch-level overhead resources compared to the simple elliptical machine that is made in The complex elliptical machine made in complex machine will use V overhead resources because it is complex. Because Vif Ellipse uses only machine-hours to allocate overhead costs to elliptical machines. both the simple and the complex machines will be allocated the same amount of overhead costs per machine the complex karaoke machine will be allocated a greater amount of overhead costs per machine than the simple machine the simple machine will be allocated a greater amount of overhead costs per machine than the complex machine 中 開1329 HLpoU uses Uy a -IUUIS IU duLdie uveTRUau USIS IU Gpar a v and the simple machine will be As a result, the complex elliptical machine will be Requirement 3. How is the activity-hierarchy helpful to Ellipse Ltd in managing its business? The activity-hierarchy can be helpful to Ellipse Ltd in managing its business through: O A. Reducing the number of indirect cost pools, creating less homogeneous indirect cost pools, allocating more indirect costs to cost objects and identifying cost objects at the output unit-level. O B. Identifying the cost benefit of implementing a simple costing system. O C. Pricing and product mix decisions, cost reduction and process improvement decisions, design decisions, and planning and managing activities. O D. All of the above. Click to select your answer.
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