MANAGERIAL ACCOUNTING LL/W ACCESS
17th Edition
ISBN: 9781265537883
Author: Garrison
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Textbook Question
Chapter 2.A, Problem 1E
EXERCISE 2A-1 Activity-Based Absorption Costing LO2-5
Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow:
Direct Labor-Hours per Unit |
AnnualProduction | |
Hubs | 0.80 | 10,000 units |
Sprockets | 0.40 | 40,000 units |
Additional information about the company follows:
- Hubs require $32 in direct materials per unit and Sprockets require $18.
- The direct labor wage rate is $15 per hour.
- Hubs are more complex to manufacture than Sprockets and they require special processing.
- The company's activity-based absorption costing system has the following activity cost pools:
Expected Activity
Activity Cost Pool (and Activity Measure) | EstimatedOverhead Cost | Hubs | Sprockets | Total |
Machine setups (number of setups) | $72,000 |
100 | 300 | 400 |
Special processing (machine-hours) | $200,000 | 5,000 | 0 | 5,000 |
General factory (Direct labor-hours) | $816,000 | 8,000 | 16,000 | 24,000 |
Required:
- Compute the activity rate for each activity cost pool.
- Compute the unit product cost for Hubs and Sprockets using activity-based absorption costing.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
QUESTION 2
Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow:
Direct Labor-Hours per Unit Annual Production
0.80
13,000
51,000
Hubs
Sprockets 0.40
Additional information about the company follows:
units
units
1. Hubs require $28 in direct materials per unit, and Sprockets require $12.
2. The direct labor wage rate is $12 per hour.
3. Hubs require special equipment and are more complex to manufacture than Sprockets.
4. The ABC system has the following activity cost pools:
Activity Cost Pool (Activity Measure)
Machine setups (number of setups)
Special processing (machine-hours)
General factory (organization-sustaining)
Estimated Overhead Cost
$ 33,930
$ 264,000
$ 398,000
Required:
1. Compute the activity rate for each activity cost pool.
2. Determine the unit product cost of each product according to the ABC system.
For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).
BIUS
Paragraph
Arial
10pt
111
ען
<
Total
261
4,800
ΝΑ
I.
g
Chapter 6: A Closer Look on Cost Accounting
The company makes 2,350 units of product X a year, requiring a total os
3.300 machine hours, 250 orders and 200 inspection hours per year. The
product's direct material cost is P201.50 and its direct labor cost in
P211.11 per unit. The product sells for P590 per unit. According to the
activity-based costing system, the gross margin for product X is?
423,087.50
b. 350,435.50
c. 416,890
d. None of the choice
a.
56.
The following information is available for Mary Corp.
Activity Pool
Setups
Quality Inspections
Assembly (direct labor hour)
What is the activity rate for setups?
Activity Base
50,000
120,000
400,000
Budgeted Amount
300,000
600,000
2,000,000
a. P5.09
c. РО.75
d. P58.00
b. Рб.00
The activity rate for quality inspection is:
с. Рб.00
d. P5.09
a. P5.29
b. P5.00
Chhom Incorporated, manufactures and cells two products Product F and Product U4 Data concerning the expected production of each product and the expected total direct labor hours (DLH required to produce that output
appear below
Product F9
Product 04
Total direct labor-hoursi
Expected Direct Labor-Hours Total Direct
Production
300
600
Activity Cost Pools
Labor-related
Production orders
order size
Per Unit
4.0
2.0
The direct labor rate is $25.90 per DLH The direct materials cost per unit is $285 for Product F9 and $244 for Product 4
The company is considering adopting an activity based costing system with the following activity cost pools, activity measures, and expected activity
Activity
Measures
DLHS
orders
MHS
Estimated
Overhead Cost Product
$ 42,600
67,630
137,820
$ 248,050
Labor-Hours
1,200
1,200
2,400
1,200
400
3,300
Expected Activity
Product U
1,200
GOO
3,100
Total
2,400
1,000
4,400
Chapter 2 Solutions
MANAGERIAL ACCOUNTING LL/W ACCESS
Ch. 2.A - EXERCISE 2A-1 Activity-Based Absorption Costing...Ch. 2.A - EXERCISE 2A-2 Activity-Based Absorption Costing as...Ch. 2.A - EXERCISE 2A-3 Activity-Based Absorption Costing as...Ch. 2.A - PROBLEM 2A-4 Activity-Based Absorption Costing as...Ch. 2.A - Prob. 5PCh. 2.A -
CASE 2A-6 Activity-Based Absorption Costing and...Ch. 2.B - EXERCISE 2B-1 Overhead Rate Based on Capacity...Ch. 2.B - EXERCISE 2B-2 Overhead Rates and Capacity Issues...Ch. 2.B - Prob. 3PCh. 2.B - Prob. 4C
Ch. 2 - Prob. 1QCh. 2 - What is absorption costing?Ch. 2 - What is normal costing?Ch. 2 - How is the unit product cost of a job calculated?
Ch. 2 - Explain the four-step process used to compute a...Ch. 2 - What is the purpose of the job cost sheet in a...Ch. 2 - Explain why some production costs must be assigned...Ch. 2 - Why do companies use predetermined overhead rates...Ch. 2 - What factors should be considered in selecting an...Ch. 2 - If a company fully allocates all of its overhead...Ch. 2 - Would you expect the amount of applied overhead...Ch. 2 - Prob. 12QCh. 2 - What is a plantwide overhead rate? Whyare multiple...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 3AECh. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 1F15Ch. 2 - Prob. 2F15Ch. 2 - Prob. 3F15Ch. 2 - Prob. 4F15Ch. 2 - Prob. 5F15Ch. 2 - Prob. 6F15Ch. 2 - Prob. 7F15Ch. 2 - Prob. 8F15Ch. 2 - Prob. 9F15Ch. 2 - Prob. 10F15Ch. 2 - Prob. 11F15Ch. 2 - Sweeten Company had no jobs in progress at the...Ch. 2 - Prob. 13F15Ch. 2 - Prob. 14F15Ch. 2 - Prob. 15F15Ch. 2 - EXERCISE 2-1 Compute a Predetermined Overhead Rate...Ch. 2 - Prob. 2ECh. 2 - EXERCISE 2–3 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 24 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 2-5 Computing Total Job Costs and Unit...Ch. 2 - Prob. 6ECh. 2 - EXERCISE 2-7 Job-Order Costing; Working Backwards...Ch. 2 - EXERCISE 2-8 Applying Overhead Cost; Computing...Ch. 2 - EXERCISE 2–9 Job-Order Costing and Decision Making...Ch. 2 - Prob. 10ECh. 2 - Prob. 11ECh. 2 - Prob. 12ECh. 2 - EXERCISE 2—13 Departmental Predetermined Overhead...Ch. 2 - EXERCISE 214 Job-Orders Costing for a Service...Ch. 2 - Prob. 15ECh. 2 - PROBLEM 2—16 Plantwide Predetermined Overhead...Ch. 2 - PROBLEM 217 Plantwide and Departmental...Ch. 2 - Prob. 18PCh. 2 - Prob. 19PCh. 2 - Prob. 20PCh. 2 - PROBLEM 2-21 Plant wide Versus Multiple...Ch. 2 - CASE 2-22 Plantwide versus Departmental Overhead...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 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?arrow_forwardHart Manufacturing makes three products. Each product requires manufacturing operations in three departments: A, B, and C. The labor-hour requirements, by department, are as follows: During the next production period the labor-hours available are 450 in department A, 350 in department B, and 50 in department C. The profit contributions per unit are 25 for product 1, 28 for product 2, and 30 for product 3. a. Formulate a linear programming model for maximizing total profit contribution. b. Solve the linear program formulated in part (a). How much of each product should be produced, and what is the projected total profit contribution? c. After evaluating the solution obtained in part (b), one of the production supervisors noted that production setup costs had not been taken into account. She noted that setup costs are 400 for product 1, 550 for product 2, and 600 for product 3. If the solution developed in part (b) is to be used, what is the total profit contribution after taking into account the setup costs? d. Management realized that the optimal product mix, taking setup costs into account, might be different from the one recommended in part (b). Formulate a mixed-integer linear program that takes setup costs provided in part (c) into account. Management also stated that we should not consider making more than 175 units of product 1, 150 units of product 2, or 140 units of product 3. e. Solve the mixed-integer linear program formulated in part (d). How much of each product should be produced and what is the projected total profit contribution? Compare this profit contribution to that obtained in part (c).arrow_forwardBountiful Manufacturing produces two types of bike frames (Frame X and Frame Y). Frame X passes through four processes: cutting, welding, polishing, and painting. Frame Y uses three of the same processes: cutting, welding, and painting. Each of the four processes employs 10 workers who work eight hours each day. Frame X sells for 40 per unit, and Frame Y sells for 55 per unit. Materials is the only unit-level variable expense. The materials cost for Frame X is 20 per unit, and the materials cost for Frame Y is 25 per unit. Bountifuls accounting system has provided the following additional information about its operations and products: Bountifuls management has determined that any production interruptions can be corrected within two days. Required: 1. Assuming that Bountiful can meet daily market demand, compute the potential daily profit. Now, compute the minutes needed for each process to meet the daily market demand. Can Bountiful meet daily market demand? If not, where is the bottleneck? Can you derive an optimal mix without using a graphical solution? If so, explain how. 2. Identify the objective function and the constraints. Then, graph the constraints facing Bountiful. Determine the optimal mix and the maximum daily contribution margin (throughput). 3. Explain how a drum-buffer-rope system would work for Bountiful. 4. Suppose that the Engineering Department has proposed a process design change that will increase the polishing time for Frame X from 15 to 23 minutes per unit and decrease the welding time from 15 minutes to 10 minutes per unit (for Frame X). The cost of process redesign would be 10,000. Evaluate this proposed change. What step in the TOC process does this proposal represent?arrow_forward
- Crafts 4 All has these costs associated with production of 12,000 units of accessory products: direct materials, $19; direct labor, $30; variable manufacturing overhead, $15; total fixed manufacturing overhead, $450,000. What is the cost per unit under both the variable and absorption methods?arrow_forwardRough Stuff makes 2 products: khaki shorts and khaki pants for men. Each product passes through the cutting machine area, which is the chief constraint during production. Khaki shorts take 15 minutes on the cutting machine and have a contribution margin per pair of shorts of $16. Khaki pants take 24 minutes on the cutting machine and have a contribution margin per pair of pants of $32. If it is assumed that Rough Stuff has 4,800 hours available on the cutting machine to service a minimum demand for each product of 3,000 units, how many of each product should be made?arrow_forwardCost Accounting 250 Candice Company uses activity-based costing to determine the unit product costs for external reports. The company has two products: Candy A and Candy B. The annual production sales of Candy A is 10,000 units and of Candy B is 4,000 units. There are three overhead activity centers, with estimated overhead costs and expected activíty as follows Expected Activity Candy B 150 Activity Est. Overhead Candy A Total Activity 1 Activity 2 Activity 3 25,000 65,000 90,000 100 250 800 200 1,000 3,000 13. The overhead cost per unit of Candy A under activity-based costing is 1,000 2,000 a. Р6.00 b. P9.70 C. P1.50 d. P3.00arrow_forward
- Question No. 1-2 The estimated costs of producing 6,000 units of a component are: Per Unit Direct Material $10 Direct Labor 8 Applied Variable Factory Overhead 9 Applied Fixed Factory Overhead $1.5 per direct labor dollar The same component can be purchased from market at a price of $29 per unit. If the component is purchased from market, 25% of the fixed factory overhead will be saved. 12 Required: a. Should the component be purchased from the market? b. Being a production manager, provide your iogicai opinion on choosing between purchasing the component from market or producing in-housearrow_forwardRequired information [The following information applies to the questions displayed below.] Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow: Direct Labor-Hours per unit 0.40 0.80 Annual Production 18,000 units 76,000 units Rims Posts Additional information about the company follows: a. Rims require $10 in direct materials per unit, and Posts require $7. b. The direct labor wage rate is $17 per hour. c. Rims are more complex to manufacture than Posts and they require special equipment. d. The ABC system has the following activity cost pools: Estimated Activity Activity Cost Pool Mach ine setups Special process ing General factory Activity Measure Number of setups Mach ine-hours Direct labor-hours Estimated Overhead Cost $ 25,080 $ 122,360 $ 702,000 Rims 80 2,000 7,200 Total 300 2,000 68,000 Posts 220 60,800 2. Determine the unit product cost of each product according to the ABC system. (Do not round intermediate…arrow_forwardcer Fouri Multiple Choice O $25.90 $48.09 Abbe Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 800 units and of Product B is 600 units. There are three activity cost pools, with estimated costs and expected activity as follows: Activity Cost Pools Activity 1 $ 17,460 Activity 2 $ 19,987 $ 29,884 Activity 3 The overhead cost per unit of Product B is closest to: (Round your intermediate calculations to 2 decimal places.) $34.73 Chapter Four - Connect Estimated Overhead Cost $11.49 Saved Expected Activity Product B 600 600 120 Product A 600 1,700 400 Humans and Animals Parallels Save & Exit Submit 88arrow_forward
- Question 1.2 Alejandro Kirk Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labour dollars. For 2021, Alejandro Kirk the following data for the two products: Deluxe Standard Sales units 50,000 400,000 Sales price per unit $650.00 $475.00 Direct material and labour costs per unit $180.00 $130.00 Manufacturing support costs per unit $80.00 $120.00 Last year, Alejandro Kirk Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information: Activity Cost Driver Cost Total Deluxe Standard Setups # of setups $500,000 500 400 100 Machine related # of machine hours…arrow_forwardRequired information Skip to question [The following information applies to the questions displayed below.] Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow: Direct Labor-Hours per unit Annual Production Rims 0.60 26,000 units Posts 0.60 84,000 units Additional information about the company follows: Rims require $17 in direct materials per unit, and Posts require $14. The direct labor wage rate is $20 per hour. Rims are more complex to manufacture than Posts and they require special equipment. The ABC system has the following activity cost pools: Activity Cost Pool Activity Measure Estimated Activity Estimated Overhead Cost Rims Posts Total Machine setups Number of setups $ 39,480 80 320 400 Special processing Machine-hours $ 146,160 3,000 0 3,000 General factory Direct labor-hours $ 1,092,000 15,600 50,400 66,000 What us the unit cost ofpostsarrow_forwardRequired Information The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $225 and $175, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 130,000 units of each product Its average cost per unit for each product at this level of activity are given below. Beta $24 32 Direct materials Direct labor Variable manufacturing overhead Traceable fFixed manufacturing overhead Variable selling expenses Common fixed expenses %2442 42 34 31. Total cost per unit $173 607$ The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. Assume that Cane normally produces and sells 59,000 Betas per year. What is the financial advantage (disadvantage) of iscontinuing the Beta product line? o search 近arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeFinancial & Managerial AccountingAccountingISBN:9781337119207Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
- Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Financial & Managerial Accounting
Accounting
ISBN:9781337119207
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Cost Classifications - Managerial Accounting- Fixed Costs Variable Costs Direct & Indirect Costs; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=QQd1_gEF1yM;License: Standard Youtube License