Zapato Company produces two types of boots: vaquero and vaquera. There are four activities associated with the two products. Drivers for the four activities are as follows: Vaquero Vaquera Cutting hours 2,120 5,400 Assembly hours 2,850 4,650 Inspection hours 980 2,430 Rework hours 150 450 Required: 1. Calculate the consumption ratios for the four drivers. Round your answers to two decimal places. Activity Driver Vaquero Vaquera Cutting hours Assembly hours Inspection hours Rework hours

Zapato Company produces two types of boots: vaquero and vaquera. There are four activities associated with the two products. Drivers for the four activities are as follows: Vaquero Vaquera Cutting hours 2,120 5,400 Assembly hours 2,850 4,650 Inspection hours 980 2,430 Rework hours 150 450 Required: 1. Calculate the consumption ratios for the four drivers. Round your answers to two decimal places. Activity Driver Vaquero Vaquera Cutting hours Assembly hours Inspection hours Rework hours

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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Grundvig Manufacturing produces several types of bolts used in aircraft. The bolts are produced in batches and grouped into three product families. Because the product families are used in different kinds of aircraft, customers also can be grouped into three categories, corresponding to the product family that they purchase. The number of units sold to each customer class is the same. The selling prices for the three product families range from 0.50 to 0.80 per unit. Historically, the costs of order entry, processing, and handling were expensed and not traced to individual customer groups. These costs are not trivial and totaled 9,000,000 for the most recent year. Recently, the company started emphasizing a cost reduction strategy with an emphasis on creating a competitive advantage. Upon investigation, management discovered that order-filling costs were driven by the number of customer orders processed with the following cost behavior: Step-fixed cost component: 50,000 per step (2,000 orders define a step) Variable cost component: 20 per order Grundvig currently has sufficient steps to process 200,000 orders. The expected customer orders for the year total 200,000. The expected usage of the order-filling activity and the average size of an order by customer category follow: As a result of cost behavior analysis, the marketing manager recommended the imposition of a charge per customer order. The charge was implemented by adding the cost per order to the price of each order (computed by using the projected ordering costs and expected orders). This ordering cost was then reduced as the size of the order increased and was eliminated as the order size reached 2,000 units. Within a short period of communicating this new price information to customers, the average order size for all three product families increased to 2,000 units. Required: 1. CONCEPTUAL CONNECTION Grundvig traditionally has expensed order-filling costs. What is the most likely reason for this practice? 2. Calculate the cost per order for each customer category. (Note: Round to two decimal places.) 3. CONCEPTUAL CONNECTION Calculate the reduction in order-filling costs produced by the change in pricing strategy (assuming that resource spending is reduced as much as possible and that the total units sold remain unchanged). Explain how exploiting customer activity information produced this cost reduction. Would any other internal activities benefit from this pricing strategy?
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?
Zapato Company produces two types of boots: vaquero and vaquera. There are four activities associated with the two products. Drivers for the four activities are as follows: Vaquero Vaquera Cutting hours 2,090 5,400 Assembly hours 2,850 4,650 Inspection hours 920 2,430 Rework hours 150 450 1. Calculate the consumption ratios for the four drivers. Round your answers to two decimal places. 2. Is there evidence of product diversity? Explain.
Consumption Ratios Zapato Company produces two types of boots: vaquero and vaquera. There are four activities associated with the two products. Drivers for the four activities are as follows: Vaquero Vaquera Cutting hours 2,130 5,400 Assembly hours 2,850 4,650 Inspection hours 990 2,430 Rework hours 150 450 Required: 1. Calculate the consumption ratios for the four drivers. Round your answers to two decimal places. Activity Driver Vaquero Vaquera Cutting hours Assembly hours Inspection hours Rework hours 2. Is there evidence of product diversity? Explain.
Consumption Ratios Zapato Company produces two types of boots: vaquero and vaquera. There are four activities associated with the two products. Drivers for the four activities are as follows: Vaquero Vaquera Cutting hours 2,160 5,400 Assembly hours 2,850 4,650 Inspection hours 940 2,430 Rework hours 150 450 Required: 1. Calculate the consumption ratios for the four drivers. Round your answers to two decimal places. Activity Driver Vaquero Vaquera Cutting hours fill in the blank 1 fill in the blank 2 Assembly hours fill in the blank 3 fill in the blank 4 Inspection hours fill in the blank 5 fill in the blank 6 Rework hours fill in the blank 7 fill in the blank 8 2. Is there evidence of product diversity? Explain.
Consumption Ratios; Activity Rates Saludable Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows: Scented Cards Regular Cards Inspection hours 100 80 Setup hours 80 30 Machine hours 200 550 Number of moves 215 75 The following activity data has been collected: Inspecting products $5,020 Setting up equipment 4,850 Machining 6,360 Moving materials 1,390 Required: 1. Calculate the consumption ratios for the four drivers. Round your answers to two decimal places. Scented Cards Regular Cards Inspection hours fill in the blank 1 fill in the blank 2 Setup hours fill in the blank 3 fill in the blank 4 Machine hours fill in the blank 5 fill in the blank 6 Number of moves fill in the blank 7 fill in the blank 8 2. Which of the following statements indicate there is product diversity? Explain the significance of product diversity for decision making if the company chooses…
Consumption Ratios; Activity Rates Saludable Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows: Scented Cards Regular Cards Inspection hours 130 80 Setup hours 80 10 Machine hours 210 550 Number of moves 210 80 The following activity data has been collected: Inspecting products $5,100 Setting up equipment 4,660 Machining 6,490 Moving materials 1,340 Required: 1. Calculate the consumption ratios for the four drivers. Round your answers to two decimal places.
Consumption Ratios; Activity RatesSaludable Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows: Scented Cards Regular Cards Inspection hours 1,080 720 Setup hours 420 180 Machine hours 960 2,880 Number of moves 2,880 720 The following activity data have been collected: Inspecting products $45,000 setting up equipment 28,500 Machining 30,720 Moving materials 16,200 Required:1. Calculate the consumption ratios for the four drivers (round to two decimal places).2. CONCEPTUAL CONNECTION Is there evidence of product diversity? Explain the significance of product diversity for decision making if the company chooses to use machine hours to assign all overhead.3. Calculate the activity rates that would be used to assign costs to each product (round to two decimal places).4. Suppose that the activity rate for inspecting products is $20 per inspection hour. How many hours of inspection are expected…
Walnut Systems produces two different products, Product A, which sells for $127 per unit, and Product B, which sells for $209 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows: Cost Usage by Product A Usage by Product B Design (Engineering Hours) $ 158,080 216 304 Machining (Machine Hours) $ 542,720 1,150 3,090 Inspection (Batches) $ 25,480 36 16 Walnut manufactures 10,900 units of Product A and 6,600 units of Product B per month. Each unit of Product A uses $40 of direct materials and $18 of direct labor, while each unit of Product B uses $74 of direct materials and $26 of direct labor. Required: a. Calculate the activity rate for design. (304)b. Calculate the activity rate for machining.…
Walnut Systems produces two different products, Product A, which sells for $127 per unit, and Product B, which sells for $209 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows: Cost Usage by Product A Usage by Product B Design (Engineering Hours) $ 158,080 216 304 Machining (Machine Hours) $ 542,720 1,150 3,090 Inspection (Batches) $ 25,480 36 16 Walnut manufactures 10,900 units of Product A and 6,600 units of Product B per month. Each unit of Product A uses $40 of direct materials and $18 of direct labor, while each unit of Product B uses $74 of direct materials and $26 of direct labor. Required: a. Calculate the activity rate for design.b. Calculate the activity rate for machining.c.…
Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $180 per machine hour, and the activity rate for Inspection is $580 per batch. The activity drivers are used as follows: Product A: (machine hours= 1,200) (number of batches 55) Product X: (mahine hours= 3,200) (number of batches 18) Totals: (Machine hours= 4,400) (number of batches 73) What is the amount of Machining cost assigned to Product X?
Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $139,400, while the cost of Inspection is $38,640. The activity drivers are used as follows: Product 5: (machine hours= 1,394) (number of batches 51) Product Z: (mahine hours= 2,706) (number of batches 18) Totals: (Machine hours= 4,100) (number of batches 69) What proportion of Machining activity is used by Product 5?