Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
14th Edition
ISBN: 9781337541398
Author: Carl Warren; James M. Reeve; Jonathan Duchac
Publisher: Cengage Learning
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Chapter 4, Problem 5PA
1.
To determine
Activity-based costing (ABC) method: The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base).
Formula to compute activity-based overhead rate:
To compute: The activity-based overhead rate for each of the given activities
2.
To determine
To compute: The activity-cost allocated to each of the products
3.
To determine
To draft: Customer profitability report of Incorporation AA for the year ended December 31
4.
To determine
To discuss: The inferences from the customer profitability report
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Allocating selling and administrative expenses using activity-based costing
Arctic Air Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows:
Line Item Description
Amount
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$60,000 per unit
Cost of goods sold
(28,000)
Gross profit
$32,000 per unit
In addition, the company incurs selling and administrative expenses of $226,250. The company wishes to assign these costs to its three major customers, Gough Industries, Breen Inc., and The Martin Group. These expenses are related to three major nonmanufacturing activities: customer service, project bidding, and engineering support. The engineering support is in the form of engineering changes that are placed by the customer to change the design of a product. The budgeted activity costs and activity bases associated with these activities are:
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$31,500
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Allocating selling and administrative expenses using activity - based costing
Artic Air Inc. manufactures cooling units for commercial buildings.The price and cost of goods sold for each units are as follows:
In addition, the company incurs selling and administrative expenses of $226,250. The company wishes to assign these costs to its three major customers,Gough Industries,Breen Inc., and The Martin Group.These expenses are related to three major nonmanufacturing activities:customer services,project bidding,and engineering support.The engineering support is in the form of engineering changes thet are placed by the customer to change the design of a product.The budgeted activity costs and activity bases associated with these activities are:
instructions
1.Determine the activity rates for each of the three nonmanufacturing activity pools.
2.Determine the activity costs allocated to the three customers,using the activity rates in (1)
3.Construct customer profitability reports for tile…
Allocating Selling and Administrative Expenses using Activity-Based CostingShrute Inc. manufactures office copiers, which are sold to retailers. The price and cost of goods sold for each copier are as follows:
Price$1,110per unitCost of goods sold682
Gross profit$428per unit
In addition, the company incurs selling and administrative expenses of $414,030. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related to its three major nonmanufacturing activities: customer service, sales order processing, and advertising support. The advertising support is in the form of advertisements that are placed by Shrute Inc. to support the retailer's sale of Shrute copiers to consumers. The budgeted activity costs and activity bases associated with these activities are:
ActivityBudgeted Activity Cost
Activity BaseCustomer service$76,860Number of service requestsSales order processing25,920Number of sales…
Chapter 4 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
Ch. 4 - Why would management be concerned about the...Ch. 4 - Why would a manufacturing company with multiple...Ch. 4 - Prob. 3DQCh. 4 - Prob. 4DQCh. 4 - How does activity-based costing differ from the...Ch. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Under what circumstances might the activity-based...Ch. 4 - Prob. 9DQCh. 4 - Prob. 10DQ
Ch. 4 - Single plantwide factory overhead rate The total...Ch. 4 - Multiple production department factory overhead...Ch. 4 - Activity-based costing: factory overhead costs The...Ch. 4 - Activity-based costing: selling and administrative...Ch. 4 - Activity-based costing for a service business...Ch. 4 - Prob. 1ECh. 4 - Prob. 2ECh. 4 - Prob. 3ECh. 4 - Prob. 4ECh. 4 - Multiple production department factory overhead...Ch. 4 - Prob. 6ECh. 4 - Single plantwide and multiple production...Ch. 4 - Prob. 8ECh. 4 - Prob. 9ECh. 4 - Prob. 10ECh. 4 - Prob. 11ECh. 4 - Activity cost pools, activity rates, and product...Ch. 4 - Prob. 13ECh. 4 - Prob. 14ECh. 4 - Activity-based costing and product cost distortion...Ch. 4 - Prob. 16ECh. 4 - Evaluating selling and administrative cost...Ch. 4 - Prob. 18ECh. 4 - Prob. 19ECh. 4 - Activity-based costing for a service company...Ch. 4 - Prob. 21ECh. 4 - Prob. 1PACh. 4 - Multiple production department factory overhead...Ch. 4 - Activity-based and department rate product costing...Ch. 4 - Activity-based product costing Mello Manufacturing...Ch. 4 - Prob. 5PACh. 4 - Product costing and decision analysis for a...Ch. 4 - Single plantwide factory overhead rate Spotted Cow...Ch. 4 - Multiple production department factory overhead...Ch. 4 - Activity-based department rate product costing and...Ch. 4 - Activity-based product costing Sweet Sugar Company...Ch. 4 - Prob. 5PBCh. 4 - Prob. 6PBCh. 4 - Prob. 1ADMCh. 4 - Prob. 2ADMCh. 4 - Production run size and activity improvement...Ch. 4 - Prob. 4ADMCh. 4 - Ethics in Action The controller of Tri Con Global...Ch. 4 - Communication The controller of New Wave Sounds...
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