Exercise 9-38 and 9-39 (Algo)Upriver Parts manufactures two products, V-1 and V-2, at its River Plant. Selected data for an average month for the twoproducts follow.V-1V-2Units producedDirect materials cost per unitMachine hours per unitProduction runs per month1,00010,000$2428040Production at the plant is automated and any labor cost is included in overhead. Data on manufacturing overhead at theplant follow.Machine depreciationSetup laborMaterial handling$48,00022,80015,360$86,160TotalRequired:a. Upriver currently applies overhead on the basis of machine hours. What is the predetermined overhead rate for the month? (Roundyour answer to 2 decimal places.)b. Upriver is thinking of adopting an ABC system. They have tentatively chosen the following cost drivers: machine hours for machinedepreciation, production runs for setup labor, and direct material dollars for material handling. Compute the cost driver rates for theproposed system at Upriver. (Round "Machine depreciation" answer to 2 decimal places.)Overhead rateb. Machine depreciationper machine hourper machine hourper production runa.Setup laborMaterial handling% direct material cost

Name: Exercise 9-38 and 9-39 (Algo)Upriver Parts manufactures two products,
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Description: Exercise 9-38 and 9-39 (Algo)Upriver Parts manufactures two products, V-1 and V-2, at its River Plant. Selected data for an average month for the twoproducts follow.V-1V-2Units producedDirect materials cost per unitMachine hours per unitProduction r

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Upriver Parts manufactures two products, V-1 and V-2, at its River Plant. Selected data for an average month for the two products follow. V-1 Units produced Direct materials cost per unit Machine hours per unit Production runs per month V-2 1,000 2 $ 4 1 2 80 10,000 40 Production at the plant is automated and any labor cost is included in overhead. Data on manufacturing overhead at the plant follow. SAR O0e

Upriver Parts manufactures two products, V-1 and V-2, at its River Plant. Selected data for an average month for the two products follow. V-1 Units produced Direct materials cost per unit Machine hours per unit Production runs per month V-2 1,000 2 $ 4 1 2 80 10,000 40 Production at the plant is automated and any labor cost is included in overhead. Data on manufacturing overhead at the plant follow. SAR O0e

Financial & Managerial Accounting

14th Edition

ISBN:9781337119207

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter18: Activity-Based Costing

Section: Chapter Questions

Problem 18.3APR: Activity-based and department rate product costing and product cost distortions Black and Blue...

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Activity-based and department rate product costing and product cost distortions Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: Indirect labor 507,000 Cutting Department 156,000 Finishing Department 192,000 Total 855,000 The activity hase associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Activity Budgeted Activity Cost Activity Base Production control 237,000 Number of production runs Materials handling 270,000 Number of moves Total 507,000 The activity-base usage quantities and units produced for the two products follow: Number o Production Runs Number of Moves Direct Labor HoursCutting Direct Labor HoursFinishing Units Produced Snowboards 430 5,000 4,000 2,000 6,000 Skis _70 2,500 2,000 4,000 6,000 Total 500 7,500 6,000 6,000 12,000 Instructions 1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is 315,000 and 540,000 for the Cutting and finishing departments, respectively. 2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). 3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. 4. Determine the total and per-unit cost assigned to each product under activity-based costing. 5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods.
Activity-based and department rate product costing and product cost distortions Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: Indirect labor 507,000 Cutting Department 156,000 Finishing Department 192,000 Total 855,000 The activity hase associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Activity Budgeted Activity Cost Activity Base Production control 237,000 Number of production runs Materials handling 270,000 Number of moves Total 507,000 The activity-base usage quantities and units produced for the two products follow: Number o Production Runs Number of Moves Direct Labor HoursCutting Direct Labor HoursFinishing Units Produced Snowboards 430 5,000 4,000 2,000 6,000 Skis _70 2,500 2,000 4,000 6,000 Total 500 7,500 6,000 6,000 12,000 Instructions 1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is 315,000 and 540,000 for the Cutting and finishing departments, respectively. 2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). 3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. 4. Determine the total and per-unit cost assigned to each product under activity-based costing. 5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods.
Activity-based department rate product costing and product cost distortions Big Sound Inc. manufactures two products: receivers and loud-speakers. The factory overhead incurred is as follows: Indirect labor 400,400 Cutting Department 198,800 Finishing Department 114,800 Total 714,000 The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Activity Budgeted Activity Cost Activity Base Setup 138,600 Number of setup Quality Control 261,800 Number of inspections Total 400,400 The activity-base usage quantities and units produced for the two products follow: Number o Setup Number of Inspections Direct Labor HoursSubassembly Direct Labor HoursFinal Assembly Units Produced Snowboards 430 5,000 4,000 2,000 6,000 Skis _70 2,500 2,000 4,000 6,000 Total 500 7,500 6,000 6,000 12,000 Instructions 1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is 5420,000 and 294,000 for the Subassembly and Final Assembly departments, respectively. 2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). 3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. 4. Determine the total and per-unit cost assigned to each product under activity-based costing. 5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods.
Production run size and activity improvement Littlejohn, Inc. manufactures machined parts for the automotive industry. The activity cost associated with Part XX-10 is as follows: Activity Activity-Base Usage Activity Rate = Activity Cost Fabrication 250 dlh 80per dlh 20,000 Setup 10 setups 80 per setup 800 Production control 10 prod, runs 30 per prod, run 300 Moving 10 moves 25 per move 250 Total activity cost per unit 21,350 Estimated units of production 500 Activity cost per unit 42.70 Each unit requires 30 minutes of fabrication direct labor. Moreover, part XX-10 is manufactured in production run sizes of 50 units. Each production run is set up, scheduled (production control), and moved as a batch of 50 units. Management is considering improvements in the setup, production control, and moving activities in order to cut the production run sizes by half. As a result, the number of setups, production runs, and mows will double from 10 to 20. Such improvements are expected to speed the companys ability to respond to customer orders. Setup is reengineered so that it takes 60% of the original cost per setup. Production control software will allow production control effort and cost per production run to decline by 60%. Moving distance was reduced by 40%, thus reducing the cost per mow by the same amount. A. Determine the revised activity cost per unit under the proposed changes. B. Did these improvements reduce the activity cost per unit? C. What cost per unit for setup would be required for the solution in (A) to equal the base solution?