SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company isimplementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, andOther. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost poand number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is anorganization-sustaining activity. The following costs will be assigned using the activity-based costing system:Driver and guard wagesVehicle operating expenseVehicle depreciationCustomer representative salaries and$ 1,060,000490,000370,000400,000expensesOffice expensesAdministrative expenses260,000560,000Total cost$ 3,140,000The distribution of resource consumption across thecost pools is as follows:PickupTTT!!andCustomerDelivery35%5%TravelService10%Totals100%100%100%OtherDriver and guard wagesVehicle operating expenseVehicle depreciationCustomer representative salaries and50%5%70%0%0%25%60%15%25%0%0%90%10%100%expensesOffice expenses0%20%30%50%100%< Prev2 of 8Next >search近 Assignment - required iSavedHIThe distribution of resource consumption across the activity cost pools is as follows:PickupandCustomerTravelDelivery35%ServiceOtherTotalsDriver and guard wagesVehicle operating expenseVehicle depreciationCustomer representative salaries and50%10%5%100%70%5%0%25%100%60%15%0%25%100%expensesOffice expensesAdministrative expenses0%10%50%0%90%100%0%20%30%100%0%5%60%35%100%Required:Complete the first stage allocations of costs to activity cost pools.Pickup andCustomerTravelDeliveryServiceOtherTotalsDriver and guard wagesVehicle operating expenseVehicle depreciationCustomer representative salaries and expensesOffice expensesAdministrative expenses< Prev2 of 8Next >o search

Name: SecuriCorp operates a fleet of armored cars that make scheduled picku
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Description: SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company isimplementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Serv

Under first stage allocation of costs to activitiy cost pools means division of costs into various…

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SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost p and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system: Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries and $ 1,060,000 490,000 370,000 400,000 expenses Office expenses Administrative expenses 260,000 560,000 Total cost $ 3,140,000 The distribution of resource consumption across the activity cost pools is as follows: Pickup and Customer Service Travel 50% Delivery 35% 5% 15% Other 5% 25% Totals Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries and 10% 100% 70% 0% 100% 60% 0% 25% 100% 90% 30% 0% 0% expenses Office expenses 10% 50% 100% 100% 0% 20%

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost p and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system: Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries and $ 1,060,000 490,000 370,000 400,000 expenses Office expenses Administrative expenses 260,000 560,000 Total cost $ 3,140,000 The distribution of resource consumption across the activity cost pools is as follows: Pickup and Customer Service Travel 50% Delivery 35% 5% 15% Other 5% 25% Totals Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries and 10% 100% 70% 0% 100% 60% 0% 25% 100% 90% 30% 0% 0% expenses Office expenses 10% 50% 100% 100% 0% 20%

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 4CE: Larsen, Inc., produces two types of electronic parts and has provided the following data: There are...

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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?
Larsen, Inc., produces two types of electronic parts and has provided the following data: There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plantwide rate? Which product is undercosted? 3. What if the machine hours were used for the plantwide rate? Would this remove the cost distortion of a plantwide rate?
SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measuresare miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will beassigned using the activity-based costing system: Required:Complete the first stage allocations of costs to activity cost pools as illustrated in Exhibit 7–6.
SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system:
SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system: Driver and guard wages $ 720,000 Vehicle operating expense 280,000 Vehicle depreciation 120,000 Customer representative salaries and expenses 160,000 Office expenses 30,000 Administrative expenses 320,000 Total cost $ 1,630,000 The distribution of resource consumption across the activity cost pools is as follows: Travel…
SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system: Driver and guard wages $ 920,000 Vehicle operating expense 350,000 Vehicle depreciation 230,000 Customer representative salaries and expenses 260,000 Office expenses 120,000 Administrative expenses 420,000 Total cost $ 2,300,000 The distribution of resource consumption across the activity cost pools is as follows: Travel…
SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system: Driver and guard wages $ 1,100,000 Vehicle operating expense 530,000 Vehicle depreciation 410,000 Customer representative salaries and expenses 440,000 Office expenses 300,000 Administrative expenses 600,000 Total cost $ 3,380,000 The distribution of resource consumption across the activity cost pools is as follows:…
Bradford Watch Company manufactures luxury and sports watches both for male and female customers. The luxury watches are famous for the high-end design materials while the sports watches are popular for their utilities. The company uses a traditional costing system in assigning overhead costs to the products on the basis of direct labour hours. However, the Production Manager seeks to replace the existing system with the Activity-based Costing (ABC) system to keep control over costs and offer more competitive pricing. After reviewing the existing costing system and interviewing the company’s personnel in relevant departments, the accountant compiled a report highlighting resources and costs involved in manufacturing watches per month: 1. The following table lists out the overhead cost: Activity cost pool Overhead cost (£) Additional Notes Job-order set up 33,000 Procurement and placement 360,000 Installation of winding system 195,000 An auto winding system is fitted with every…
Bradford Watch Company manufactures luxury and sports watches both for male and female customers. The luxury watches are famous for the high-end design materials while the sports watches are popular for their utilities. The company uses a traditional costing system in assigning overhead costs to the products on the basis of direct labour hours. However, the Production Manager seeks to replace the existing system with the Activity-based Costing (ABC) system to keep control over costs and offer more competitive pricing. After reviewing the existing costing system and interviewing the company’s personnel in relevant departments, the accountant compiled a report highlighting resources and costs involved in manufacturing watches per month: The following table lists out the overhead cost: Activity cost pool Overhead cost (£) Additional Notes Job-order set up 33,000 Procurement and placement 360,000 Installation of winding system 195,000 An auto winding…
Bradford Watch Company manufactures luxury and sports watches both for male and female customers. The luxury watches are famous for the high-end design materials while the sports watches are popular for their utilities. The company uses a traditional costing system in assigning overhead costs to the products on the basis of direct labour hours. However, the Production Manager seeks to replace the existing system with the Activity-based Costing (ABC) system to keep control over costs and offer more competitive pricing. After reviewing the existing costing system and interviewing the company’s personnel in relevant departments, the accountant compiled a report highlighting resources and costs involved in manufacturing watches per month: The following table lists out the overhead cost: Activity cost pool Overhead cost (£) Additional Notes Job-order set up 33,000 Procurement and placement 360,000 Installation of winding system 195,000 An auto winding…
Joker Ltd manufactures two products, Normal and Plus. It has recently implemented an activity-based costing system for its manufacturing overhead costs, with the budgeted activity cost and budgeted quantity of activity driver as follows: Activity Budgeted Activity Cost Activity Driver Budgeted Quantity of Activity Driver Labour-related 205,000 Direct labour hours 41,000 Machine setups 227,000 Number of setups 5,000 General factory 340,000 Machine hours 34,000 772,000 The breakdown of the expected consumption of activities by the two products is as follows: Normal Plus Labour-related 25,000 16,000 Machine setups 2,000 3,000 General factory 20,000 14,000 For the next accounting period, the expected production volume of Normal is 4,500 units and Plus is 3,000 units. Required:Calculate the overhead cost per unit of a Plus.
Foster Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity based costing system: Overhead costs: Wages and salaries $ 178,000 Other expenses 51,000 Total $ 229,000 Distribution of resource consumption: Activity Cost Pools Total Making Bouquets Delivery Other Wages and salaries 45% 20% 35% 100% Other expenses 30% 65% 5% 100% The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows: Activity Cost Pool Activity Making bouquets 46,995 bouquets Delivery 11,800 deliveries What would be the total overhead cost per delivery according to the activity based costing system? In other words, what would be the overall activity rate for the deliveries activity cost pool? Note: Round to the nearest whole cent. Multiple Choice $5.83 $6.69 $4.12 $5.40