Concept explainers
EXERCISE 2B-1 Overhead Rate Based on Capacity LO2-6
Wixis Cabinets makes custom wooden cabinets for high-end stereo systems from specialty7 woods. The company uses a
The results of a recent month’s operations appear below:
Required:
- Prepare an income statement following the example in Exhibit 2B-1 that records the cost of unused capacity on the income statement as a period expense.
- Why do unused capacity costs arise when the predetermined overhead rate is based on capacity?
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MANAGERIAL ACCOUNTING W/ACCESS
- QUESTION 10 Lawn and Order Company manufactures industrial sprinklers and uses an activity-based costing system to allocate overhead to its products. Each sprinkler consists of 6 separate parts totaling $3 in direct materials, $2 in direct labor and requires 1 hour of machine time to produce. Additional information follows Overhead Cost Pools Pre-determined Overhead Rate Materials handling Number of parts $0.40 per part Machining Machine hours $1.50 per machine hour Assembling Inspecting Number of parts $0.40 per part Number of finished units $0.30 per finished unit Determine the amount of overhead allocated to each sprìnkler. Round your answer to 2 decimal placesarrow_forwardQ-4: Al Hamd associate manufactures two types of product X & Y and applies manufacturing overhead to all units on the basis of machine hour. Production information follows: Product X Anticipated volume (Units) Direct materials cost Direct labor cost 16,000 Rs70 Product Y 30,000 Rs120 Rs40 Rs40 The controller, who is studying the use of ABC, has determined that the firm's overhead can be identified with three activities: Activity Manufacturing setup Machine processing Product shipping Cost driver Number of setups Machine hours Outgoing shipments The activities and their respective cost drivers are as follows: Product X 100 Product Y 60 Total 160 Setups Machine hours 32,000 200 45,000 150 77,000 350 Outgoing shipments The firm total overhead of Rs.6,160,000 is subdivided as follows: Manufacturing setup Machine processing Product shipping Rs.1,344,000 Rs.3,696,000 Rs.1,120,000 Rs.6,160,000 Total Required: A. Compute the total cost of product X and Y by using company's current overhead…arrow_forwardTB Problem 5-163 (Algo) Roadmaster Tires produces a variety... Roadmaster Tires produces a variety of auto and truck tires at its Indianapolis manufacturing plant. The plant is highly automated and uses an activity-based costing system to allocate overhead costs to its various product lines. The costs and cost drivers associated with four activity cost pools are given below: Activities: Cost Cost Driver Unit Level $88,400 5,200 labor hours Batch Level $66,000 220 setups Production of 1,000 units of a small tractor tire required 320 labor hours and two setups and consumed 20% of the product sustaining activities. a. Overhead allocated using company-wide allocation base b. Overhead allocated under activity-based costing e-1. Selling price per unit under direct labor hours approach 0-2. Selling price per unit under activity-based costing Product Level $30,000 % of use Required: a. Instead of using ABC, suppose the company had used labor hours as a company-wide allocation base. How much…arrow_forward
- Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital camcorders. Model High F Great P Annual Sales in Units 10,800 16,800 Techno uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows: Direct materials Direct labor High Fi $ 38.80 $18.40 Budget factory overhead: Engineering and Design Quality Control Machinery Miscellaneous Overhead Total Great P $ 26.20 $14.00 Engineering and design hours Quality control inspection hours Machine hours Labor hours 2,560 engineering hours. 12,990 inspection hours 33,870 26,550 machine hours direct labor hours Techno's controller had been researching activity-based costing and decided to switch to it. A special study determined Techno's two products have the following budgeted activities: High F 1,040 5,720 20,360 12,080. Great P 1,520 7,270 $ 409,600 271,320 540,800 132,400 $ 1,354,120 13,510 14,470 What is the…arrow_forwardProblem A. Poodle Company manufactures two products, Mini A and Max B. Poodle's overhead costs consist of setting up machines P800,000, machining P1,800,000, and inspecting 100,000. Information on the two products Mini A Мaxi в Direct labor hours 15,000 25,000 Machine setups 400 600 Machine hours 24,000 800 26,000 | Inspections 700 Determine the following: 1. Overhead applied to Mini A using traditional costing based on direct labor hours is 2. Overhead applied to Maxi B using traditional costing based on direct labor hours is 3. Overhead applied to Mini A using activity-based costing is 4. Overhead applied to Maxi B using activity-based costing isarrow_forward1- Chapters 1,2, & 4 i 12 D N 5 X Direct labor hours Machine hours Tarnish Industries produces miniature models of farm equipment. These collectibles are in great demand. It takes two operations, molding and finishing, to complete the miniatures. Next year's expected activities are shown in the following table: # Multiple Choice 13 3 Tarnish Industries uses departmental overhead rates and is planning on a $4.10 per machine hour overhead rate for the Finishing department. Compute the budgeted manufacturing overhead cost for the Finishing department given the information shown in the table. O E . D C $307,500 $658,050 $401,800 (4 $ 4 R F Molding 75,000 DLH 98,000 MH % 5 T G fo 40 Finishing 160,500 DLH 81,500 MH 6 Y & H 4 Q Search 7 V B N A4 P 112 { [ 27 1 prt sc Help } pause Save & Exit delete backspace home lock enterarrow_forward
- Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital camcorders. Model Annual Sales in Units High F 11,100 Great P 17,100 Techno uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows: High F Great P Direct materials $ 39.10 $ 26.50 Direct labor $ 18.70 $ 14.30 Budget factory overhead: Engineering and Design 2,620 engineering hours $ 445,400 Quality Control 13,050 inspection hours 336,700 Machinery 33,930 machine hours 608,940 Miscellaneous Overhead 26,610 direct labor hours 132,550 Total $ 1,523,590 Techno's controller had been researching activity-based costing and decided to switch to it. A special study determined Techno's two products have the following budgeted activities: High F Great P…arrow_forwardTechno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital camcorders. Model High F Great P Annual Sales in Units 10,700 16,700 Techno uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows: Direct materials Direct labor Budget factory overhead: Engineering and Design Quality Control Machinery Miscellaneous Overhead Total High F $38.70 $18.30 Great P $26.10 $ 13.90 Engineering and design hours Quality control inspection hours Machine hours Labor hours 2,540 12,970 33,850 26,530 engineering hours inspection hours machine hours direct labor hours Techno's controller had been researching activity-based costing and decided to switch to it. A special study determined Techno's two products have the following budgeted activities: High F 1,030 5,710 20,350 12,070 Prev Great P 1,510 7,260 13,500 14,460 Using the firm's volume-based costing, applied factory…arrow_forwardQuestion ABC Company has established standard costs for the furniture department, in which one (1) size of the cabinet is made. The standard costs of producing one (1) of these cabinets are shown below: Direct material (Lumber)50 board feet at P4.00 per foot P200.00Labor standard8 hours at P10.00 per hour 80.00Variable overhead8 hours at P5.00 per hour 40.00Fixed overhead8 hours at P3.00 per hour 24.00Total P344.00 During January 201A, 500 cabinets were produced. The actual cost of operations during the month are shown below: Direct materials purchased (30,000 board feet at P4.10 per board foot)P123,000Direct materials used (24,000 board feet)Direct labor (4,200 hours at P9.50 per hour) 39,900Total variable overhead cost 22,000Total fixed overhead cost 11,000 The budgeted overhead for the furniture department based on a normal monthly activity of 4,500 hours is P36,000, of which P22,500 is variable and P13,500 is fixed overhead. Requirements 1. Material purchase price variance…arrow_forward
- COVID 19 Co produces two different products (Product Y and Product B) 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 $so0.000, while the cost of Inspection is $30.000. Product Y uses z0% of total machine hours and 75% of total batches What is the total Machining cost assigned to Product B Select one a. 5400.000 b. S22.500 C3375.000 d.57.500arrow_forwardProblem 3 ZXC company are using a single rate for its overhead application yet they want to decide to adopt the activity based costing in their manufacturing process. There are three activities done in the as stated below. The company usually based on 30,000 direct labor hours for its overhead and 50 pesos of materials per unit produced. The cost are as follows Activity centers Materials Handling Machine Setup Product Inspection Total Product ZZZ YYY QTY Produced 3,000 7,500 Cost 477,000 189,000 288,000 954,000 DLH Hours 8,500 12,000 DL Cost 144,000 279,000 Activity Drivers 60,000 times handled 9,000 setups 18,000 units Materials Handled 17,500 22,000 Required: 1. Compute the unit cost for each product using a single rate base on DL hours 2. Compute the unit cost for each product using activity-based costing Setups 2,250 3,600arrow_forwardMA1 - #30 Flashlight, Inc. makes two types of flashlights and is implementing an activity-based costing system. Previously, all overhead had been applied on the basis of machine hours. The company produces 11,250 units of the Deluxe model and 21,142 units of the Compact model. Additional data is as follows: Use of Driver by Use of Cost Driver Deluxe by Compact Cost Driver and Estimated Cost Pool Level of Activity Estimated Overhead Cost Equipment Setup 100 setups $20,000 65 setups 35 setups Materials 140 orders $21,000 95 orders 45 orders Ordering Quality Control 200 inspections $22,000 150 inspections 50 inspections Machining 9,000 machine hours $18,000 5,000 machine hours 4,000 machine hours Total Overhead Cost $81,000 What is the total overhead cost applied to Deluxe using activity-based costing? ○ $53,750 ○ $57,564 $23,945 ○ $76,271arrow_forward
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