Single Plantwide Rate and Activity-Based Costing Whirlpool Corporation (WHR) conducted an activity-based costing study of its Evansville, Indiana, plant in order to identify its most profitable products. Assume that we select three representative refrigerators (out of 333): one low-, one medium-, and one high-volume refrigerator. Additionally, we assume the following activity-base information for each of the three refrigerators: Three Representative Refrigerators Number of Machine Hours Number of Setups Number of Sales Orders Number of Units Refrigerator—Low Volume 24 14 38 160 Refrigerator—Medium Volume 225 13 88 1,500 Refrigerator—High Volume 900 9 120 6,000 Prior to conducting the study, the factory overhead allocation was based on a single machine hour rate. The machine hour rate was $200 per hour. After conducting the activity-based costing study, assume that three activities were used to allocate the factory overhead. The new activity rate information is assumed to be as follows: Machining Activity Setup Activity Sales Order Processing Activity Activity rate $160 $240 $55 a. Complete the following table, using the single machine hour rate to determine the per-unit factory overhead for each refrigerator (Column A) and the three activity-based rates to determine the activity-based factory overhead per unit (Column B). Finally, compute the percent change in per-unit allocation from the single to activity-based rate methods (Column C). If required, round all per unit answers to the nearest cent. Round percents to one decimal place. For column C, use the minus sign to indicate a negative or decrease. Column A Column B Column C Product Volume Class Single Rate Overhead Allocation Per Unit ABC Overhead Allocation Per Unit Percent Change in Allocation Low $fill in the blank 1 $fill in the blank 2 fill in the blank 3 % Medium $fill in the blank 4 $fill in the blank 5 fill in the blank 6 % High $fill in the blank 7 $fill in the blank 8 fill in the blank 9 %
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Single Plantwide Rate and Activity-Based Costing
Whirlpool Corporation (WHR) conducted an activity-based costing study of its Evansville, Indiana, plant in order to identify its most profitable products. Assume that we select three representative refrigerators (out of 333): one low-, one medium-, and one high-volume refrigerator. Additionally, we assume the following activity-base information for each of the three refrigerators:
| Three Representative Refrigerators | Number of Machine Hours | Number of Setups | Number of Sales Orders | Number of Units | ||||
| Refrigerator—Low Volume | 24 | 14 | 38 | 160 | ||||
| Refrigerator—Medium Volume | 225 | 13 | 88 | 1,500 | ||||
| Refrigerator—High Volume | 900 | 9 | 120 | 6,000 |
Prior to conducting the study, the factory
| Machining Activity | Setup Activity | Sales Order Processing Activity |
|
| Activity rate | $160 | $240 | $55 |
a. Complete the following table, using the single machine hour rate to determine the per-unit factory overhead for each refrigerator (Column A) and the three activity-based rates to determine the activity-based factory overhead per unit (Column B). Finally, compute the percent change in per-unit allocation from the single to activity-based rate methods (Column C).
If required, round all per unit answers to the nearest cent. Round percents to one decimal place. For column C, use the minus sign to indicate a negative or decrease.
| Column A | Column B | Column C | |
Product Volume Class |
Single Rate Overhead Allocation Per Unit |
ABC Overhead Allocation Per Unit |
Percent Change in Allocation |
| Low | $fill in the blank 1 | $fill in the blank 2 | fill in the blank 3 % |
| Medium | $fill in the blank 4 | $fill in the blank 5 | fill in the blank 6 % |
| High | $fill in the blank 7 | $fill in the blank 8 | fill in the blank 9 % |
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