Managerial Accounting, Binder Ready Version: Tools for Business Decision Making
7th Edition
ISBN: 9781118338421
Author: Weygandt, Jerry J.; Kimmel, Paul D.; Kieso, Donald E.
Publisher: WILEY
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Chapter 4, Problem 4.3DI
Adamson Company manufactures four lines of garden tools. As a result of an activity analysis, the accounting department has identified eight activity cost pools. Each of the product lines is produced in large batches, with the whole plant devoted to one product at a time. Classify each of the following activities or costs as either unit-level, batch level, product-level, or facility-level.
(a) Machining parts.
(b) Product design.
(c) Plant maintenance.
(d) Machine setup.
(e) Assembling parts.
(f) Purchasing raw materials.
(g) Property taxes.
(h) Painting.
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Lysiak Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs--equipment depreciation and supervisory expense-are allocated to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below:
Overhead costs:
Equipment depreciation
$
47,000
Supervisory expense
$
6,000
Distribution of Resource Consumption Across Activity Cost Pools:
Activity Cost Pools
Machining
Order Filling
Other
Equipment depreciation
0.60
0.10
0.30
Supervisory expense
0.60
0.20
0.20
In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:
Activity:
MHs (Machining)
Orders (Order Filling)
Product C9
6,900
200…
Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows:
Activity Cost Pools
Total Cost of Pool
Cost Driver
Estimated Cost Driver
Machining
$
183,300
Number of machine hours
61,100
Designing costs
47,725
Number of design hours
5,750
Setup costs
71,150
Number of batches
500
Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows:
Product A
Product B
Product C
Number of machine hours
21,000
31,000
9,100
Number of design hours
2,300
1,350
2,100
Number of batches
60
180
260
How would you find the total overhead?
Ramsey SARL uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs - Security expense and Building depreciation - are allocated to three activity cost pools - Shipping, Carving, and Other - based on resource consumption. Data to perform these allocations appear below:
Overhead Costs:
Security expense: $105,000
Building depreciation: $70,000
Distribution of Resource Consumption across Activity Cost Pools:
Overhead Cost
Activity Cost Pools
Shipping
Carving
Other
Security expense
0.30
0.42
0.28
Building depreciation
0.34
0.32
0.34
The second stage of allocation is done by assigning the Shipping costs to products on the basis of orders shipped while products are assigned Carving costs based on machine hours. Costs assigned to the Other activity pool are not further assigned to products. Activity information for Ramsey's only two products is below:
orders shipped
machine hours
Product BA-15:
6,300
1,500…
Chapter 4 Solutions
Managerial Accounting, Binder Ready Version: Tools for Business Decision Making
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Ch. 4 - Prob. 11QCh. 4 - What is the formula for assigning activity cost...Ch. 4 - What are the benefits of activity-based costing?Ch. 4 - What are the limitations of activity-based...Ch. 4 - Under what conditions is ABC generally the...Ch. 4 - Prob. 16QCh. 4 - Prob. 17QCh. 4 - Prob. 18QCh. 4 - Prob. 19QCh. 4 - Prob. 20QCh. 4 - Prob. 4.1BECh. 4 - Finney Inc. has conducted an analysis of overhead...Ch. 4 - Splash Co. identifies the following activities...Ch. 4 - Mason Company manufactures four products in a...Ch. 4 - Morgana Company identifies three activities in its...Ch. 4 - Weisman, Inc. uses activity-based costing as the...Ch. 4 - Spud, Inc. a manufacturer of gourmet potato chips,...Ch. 4 - Prob. 4.8BECh. 4 - Pine and Danner is an architectural firm that is...Ch. 4 - Prob. 4.10BECh. 4 - Fixlt, Inc. operates 20 injection molding machines...Ch. 4 - Prob. 4.12BECh. 4 - Indicate whether the following statements are true...Ch. 4 - Compute activity-based overhead rates and assign...Ch. 4 - Adamson Company manufactures four lines of garden...Ch. 4 - Ready Ride is a trucking company. It provides...Ch. 4 - Saddle Inc. has two types of handbags: standard...Ch. 4 - Ayala Inc. has conducted the following analysis...Ch. 4 - EcoFabrics has budgeted overhead costs of 945,000....Ch. 4 - Altex Inc. manufactures two products: car wheels...Ch. 4 - Perdon Corporation manufactures safeslarge mobile...Ch. 4 - Santana Corporation manufactures snowmobiles in...Ch. 4 - Rojas Vineyards in Oakville, California, produces...Ch. 4 - Wilmington, Inc. manufactures five models of...Ch. 4 - Air United, Inc. manufactures two products:...Ch. 4 - Kragan Clothing Company manufactures its own...Ch. 4 - Health 'R Us, Inc., uses a traditional product...Ch. 4 - Santana Corporation manufactures snowmobiles in...Ch. 4 - William Mendel Sons, Inc. is a small...Ch. 4 - Venus Creations sells window treatments (shades,...Ch. 4 - Snap Prints Company is a small printing and...Ch. 4 - Lasso and Markowitz is a law firm that is...Ch. 4 - Manzeck Company operates a snow-removal service....Ch. 4 - Combat Fire, Inc. manufactures steel cylinders and...Ch. 4 - Prob. 4.2APCh. 4 - Shaker Stairs Co. designs and builds factory-made...Ch. 4 - Prob. 4.4APCh. 4 - Lewis and Stark is a public accounting firm that...Ch. 4 - CURRENT DESIGNS As you teamed in the previous...Ch. 4 - Prob. 4.1BYPCh. 4 - Prob. 4.2BYPCh. 4 - Curtis Rich, the cost accountant for Hi-Power...Ch. 4 - As discussed in the chapter, the principles...
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