Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing. Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product. Direct Labor Cost: Direct labor cost is the cost of the labor paid to the employees who are directly involved in the conversion of the raw materials to the finished products. For example: Wages paid to the mechanic. To compute: Total manufacturing cost per liter of products, under traditional costing.

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Answer 1

Question

Chapter 4, Problem 4.4AP

a)

To determine

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

Direct Labor Cost: Direct labor cost is the cost of the labor paid to the employees who are directly involved in the conversion of the raw materials to the finished products. For example: Wages paid to the mechanic.

To compute: Total manufacturing cost per liter of products, under traditional costing.

b)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Prepare: A schedule showing computation of overhead rates under activity-based costing.

c)

To determine

Cost Driver: The cost driver refers to the all the activities on which the money is spent to produce the product or the service. It has a cause-effect relationship with the resources utilized in production. The cost drivers are used to form the activity cost pools.

Activity cost pool: Activity cost pool refers to the overhead cost related to an activity. This is often calculated to get an accurate estimate of the production cost.

To Prepare: The schedule to assign activity’s overhead cost pool to each product based on the uses of cost driver.

d)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

To Compute: The total manufacturing cost per unit for each product under activity-based costing.

e)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Write: A memo to JE discussing the implications of the analysis done.

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2. Sta. Elena produces and sells wines. Their current capacity is 100,000 gallons a year. Last year, they sold 100,000 gallons of wine, 12% of which were in 60-gallon barrels, 58% in 1-gallon jugs, and 30% in 0.2- gallon bottles. The base selling price is $20 per gallon in barrels. The selling price for wine in jugs per gallon is 25% higher, while that in bottles per gallon is 40% higher. Variable cost based on the selling price is 50% for barrels, 60% for jugs, and 70% for bottles. The annual fixed expenses amount to $500,000. Management would like to know the breakeven quantity for each of the three products, the net profit for the year, as well as what strategy to implement to increase net profit, while keeping fixed costs, and variable cost ratios constant.

Shannon’s distributes its beer through a wholesaler, Miller of Denton. The retail selling price for a six pack of its typical craft beer is $12.00. The retailer’s cost per six pack is $8.00. The wholesaler sells the beer to the retailer for this price. Shannon’s sells a six pack to the wholesaler for $5.40. Shannon’s variable costs of production, packaging, and distribution are $3.60 per six pack. Shannon’s has the following annual fixed operating and marketing costs: Marketing Costs $52,405 Consumer Advertising $31,017 Trade Promotion $30,000 Sales Promotion $18,000 What is Shannon’s annual break-even in six packs of beer sold?

Shannon’s distributes its beer through a wholesaler, Miller of Denton. The retail selling price for a six-pack of its typical craft beer is $12.00. The retailer’s cost per six-pack is $8.00. The wholesaler sells the beer to the retailer for this price. Shannon’s sells a six-pack to the wholesaler for $5.40. Shannon’s variable costs of production, packaging, and distribution are $3.60 per six-pack. Shannon’s has the following annual fixed operating and marketing costs: Marketing Costs $50,924 Consumer Advertising $35,421 Trade Promotion $30,000 Sales Promotion $18,000 What is Shannon’s annual break-even in six packs of beer sold?

Answer 2

Question

Chapter 4, Problem 4.4AP

a)

To determine

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

Direct Labor Cost: Direct labor cost is the cost of the labor paid to the employees who are directly involved in the conversion of the raw materials to the finished products. For example: Wages paid to the mechanic.

To compute: Total manufacturing cost per liter of products, under traditional costing.

b)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Prepare: A schedule showing computation of overhead rates under activity-based costing.

c)

To determine

Cost Driver: The cost driver refers to the all the activities on which the money is spent to produce the product or the service. It has a cause-effect relationship with the resources utilized in production. The cost drivers are used to form the activity cost pools.

Activity cost pool: Activity cost pool refers to the overhead cost related to an activity. This is often calculated to get an accurate estimate of the production cost.

To Prepare: The schedule to assign activity’s overhead cost pool to each product based on the uses of cost driver.

d)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

To Compute: The total manufacturing cost per unit for each product under activity-based costing.

e)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Write: A memo to JE discussing the implications of the analysis done.

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Answer 3

Question

Chapter 4, Problem 4.4AP

a)

To determine

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

Direct Labor Cost: Direct labor cost is the cost of the labor paid to the employees who are directly involved in the conversion of the raw materials to the finished products. For example: Wages paid to the mechanic.

To compute: Total manufacturing cost per liter of products, under traditional costing.

b)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Prepare: A schedule showing computation of overhead rates under activity-based costing.

c)

To determine

Cost Driver: The cost driver refers to the all the activities on which the money is spent to produce the product or the service. It has a cause-effect relationship with the resources utilized in production. The cost drivers are used to form the activity cost pools.

Activity cost pool: Activity cost pool refers to the overhead cost related to an activity. This is often calculated to get an accurate estimate of the production cost.

To Prepare: The schedule to assign activity’s overhead cost pool to each product based on the uses of cost driver.

d)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

To Compute: The total manufacturing cost per unit for each product under activity-based costing.

e)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Write: A memo to JE discussing the implications of the analysis done.

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Answer 4

Question

Chapter 4, Problem 4.4AP

a)

To determine

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

Direct Labor Cost: Direct labor cost is the cost of the labor paid to the employees who are directly involved in the conversion of the raw materials to the finished products. For example: Wages paid to the mechanic.

To compute: Total manufacturing cost per liter of products, under traditional costing.

b)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Prepare: A schedule showing computation of overhead rates under activity-based costing.

c)

To determine

Cost Driver: The cost driver refers to the all the activities on which the money is spent to produce the product or the service. It has a cause-effect relationship with the resources utilized in production. The cost drivers are used to form the activity cost pools.

Activity cost pool: Activity cost pool refers to the overhead cost related to an activity. This is often calculated to get an accurate estimate of the production cost.

To Prepare: The schedule to assign activity’s overhead cost pool to each product based on the uses of cost driver.

d)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

To Compute: The total manufacturing cost per unit for each product under activity-based costing.

e)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Write: A memo to JE discussing the implications of the analysis done.

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Answer 5

Chapter 4, Problem 4.4AP

a)

To determine

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

Direct Labor Cost: Direct labor cost is the cost of the labor paid to the employees who are directly involved in the conversion of the raw materials to the finished products. For example: Wages paid to the mechanic.

To compute: Total manufacturing cost per liter of products, under traditional costing.

b)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Prepare: A schedule showing computation of overhead rates under activity-based costing.

c)

To determine

Cost Driver: The cost driver refers to the all the activities on which the money is spent to produce the product or the service. It has a cause-effect relationship with the resources utilized in production. The cost drivers are used to form the activity cost pools.

Activity cost pool: Activity cost pool refers to the overhead cost related to an activity. This is often calculated to get an accurate estimate of the production cost.

To Prepare: The schedule to assign activity’s overhead cost pool to each product based on the uses of cost driver.

d)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

To Compute: The total manufacturing cost per unit for each product under activity-based costing.

e)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Write: A memo to JE discussing the implications of the analysis done.

Answer 6

Chapter 4, Problem 4.4AP

a)

To determine

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

Direct Labor Cost: Direct labor cost is the cost of the labor paid to the employees who are directly involved in the conversion of the raw materials to the finished products. For example: Wages paid to the mechanic.

To compute: Total manufacturing cost per liter of products, under traditional costing.

Answer 7

Chapter 4, Problem 4.4AP

a)

To determine

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

Direct Labor Cost: Direct labor cost is the cost of the labor paid to the employees who are directly involved in the conversion of the raw materials to the finished products. For example: Wages paid to the mechanic.

To compute: Total manufacturing cost per liter of products, under traditional costing.

Answer 8

b)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Prepare: A schedule showing computation of overhead rates under activity-based costing.

Answer 9

b)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Prepare: A schedule showing computation of overhead rates under activity-based costing.

Answer 10

c)

To determine

Cost Driver: The cost driver refers to the all the activities on which the money is spent to produce the product or the service. It has a cause-effect relationship with the resources utilized in production. The cost drivers are used to form the activity cost pools.

Activity cost pool: Activity cost pool refers to the overhead cost related to an activity. This is often calculated to get an accurate estimate of the production cost.

To Prepare: The schedule to assign activity’s overhead cost pool to each product based on the uses of cost driver.

Answer 11

c)

To determine

Cost Driver: The cost driver refers to the all the activities on which the money is spent to produce the product or the service. It has a cause-effect relationship with the resources utilized in production. The cost drivers are used to form the activity cost pools.

Activity cost pool: Activity cost pool refers to the overhead cost related to an activity. This is often calculated to get an accurate estimate of the production cost.

To Prepare: The schedule to assign activity’s overhead cost pool to each product based on the uses of cost driver.

Answer 12

d)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

To Compute: The total manufacturing cost per unit for each product under activity-based costing.

Answer 13

d)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

To Compute: The total manufacturing cost per unit for each product under activity-based costing.

Answer 14

e)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Write: A memo to JE discussing the implications of the analysis done.

Answer 15

e)

To determine

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

Traditional Product Costing: Accounting process to determine the total cost incurred to manufacture a product on the basis of volume metric is known as traditional product costing.

Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.

To Write: A memo to JE discussing the implications of the analysis done.

Answer 16

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Answer 17

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Answer 18

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Answer 19

Ch. 4 - Under what conditions is direct labor a valid...Ch. 4 - What has happened in recent industrial history to...Ch. 4 - In an automated manufacturing environment, what...Ch. 4 - What is generally true about overhead allocation...Ch. 4 - What are the principal differences between...Ch. 4 - What is the formula for computing activity-based...Ch. 4 - What steps are involved in developing an activity-...Ch. 4 - Prob. 8Q Ch. 4 - What is an activity cost pool?Ch. 4 - Prob. 10Q

Solution Summary: The author explains how to calculate the total manufacturing cost per unit for CoolDay and LiteMist.

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

To Compute: The total manufacturing cost per unit for each product under activity-based costing.

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Chapter 4 Solutions

Solution Summary: The author explains how to calculate the total manufacturing cost per unit for CoolDay and LiteMist.

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business. To Compute: The total manufacturing cost per unit for each product under activity-based costing.

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Chapter 4 Solutions

Activity-Based Costing (ABC): Under activity-based costing the different cost is assigned to a different activity. The cost is determined on the basis of the activities performed by the business.

To Compute: The total manufacturing cost per unit for each product under activity-based costing.