Horngren's Cost Accounting, Student Value Edition (16th Edition)
16th Edition
ISBN: 9780134476032
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 5, Problem 5.18E
Cost hierarchy. Roberta, Inc., manufactures elliptical machines for several well-known companies. The machines differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2017:
- a. Indirect
manufacturing labor costs such as supervision that supports direct manufacturing labor, $935,000 - b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000
- c. Cost of indirect materials, $234,000
- d. Costs incurred to set up machines each time a different product needs to be manufactured, $392,000
- e. Designing processes, drawing process charts, and making engineering process changes for products, $236,900
- f. Machine-related
overhead costs such asdepreciation , maintenance, and production engineering, $865,000 (These resources relate to the activity of running the machines.) - g. Plant management, plant rent, and plant insurance, $498,000
- 1. Classify each of the preceding costs as output unit–level, batch-level, product-sustaining, or facility-sustaining. Explain each answer.
Required
- 2. Consider two types of elliptical machines made by Roberta, Inc. One machine, designed for professional use, is complex to make and is produced in many batches. The other machine, designed for home use, is simple to make and is produced in few batches. Suppose that Roberta needs the same number of machine-hours to make each type of elliptical machine and that Roberta allocates all overhead costs using machine-hours as the only allocation base. How, if at all, would the machines be miscosted? Briefly explain why.
- 3. How is the cost hierarchy helpful to Roberta in managing its business?
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Roberta, Inc., manufactures elliptical machines for several well-known companies. The machines differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2017:
a. Indirect manufacturing labor costs such as supervision that supports direct manufacturing labor, $935,000
b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000
c. Cost of indirect materials, $234,000
d. Costs incurred to set up machines each time a different product needs to be manufactured, $392,000
e. Designing processes, drawing process charts, and making engineering process changes for products, $236,900
f. Machine-related overhead costs such as depreciation, maintenance, and production engineering, $865,000 (These resources relate to the activity of running the machines.)
g. Plant management, plant rent, and plant insurance, $498,000
1. Classify each of the preceding costs…
Roberta, Inc., manufactures elliptical machines for several well-known companies. The machines differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2017:
a. Indirect manufacturing labor costs such as supervision that supports direct manufacturing labor, $935,000
b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000
c. Cost of indirect materials, $234,000
d. Costs incurred to set up machines each time a different product needs to be manufactured, $392,000
e. Designing processes, drawing process charts, and making engineering process changes for products, $236,900
f. Machine-related overhead costs such as depreciation, maintenance, and production engineering, $865,000 (These resources relate to the activity of running the machines.)
g. Plant management, plant rent, and plant insurance, $498,000
Q1. How is the cost hierarchy helpful…
Roberta, Inc., manufactures elliptical machines for several well-known companies. The machines differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2017:
a. Indirect manufacturing labor costs such as supervision that supports direct manufacturing labor, $935,000
b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000
c. Cost of indirect materials, $234,000
d. Costs incurred to set up machines each time a different product needs to be manufactured, $392,000
e. Designing processes, drawing process charts, and making engineering process changes for products, $236,900
f. Machine-related overhead costs such as depreciation, maintenance, and production engineering, $865,000 (These resources relate to the activity of running the machines.)
g. Plant management, plant rent, and plant insurance, $498,000
Q1. Consider two types of elliptical…
Chapter 5 Solutions
Horngren's Cost Accounting, Student Value Edition (16th Edition)
Ch. 5 - What is broad averaging, and what consequences can...Ch. 5 - Why should managers worry about product...Ch. 5 - What is costing system refinement? Describe three...Ch. 5 - What is an activity-based approach to designing a...Ch. 5 - Describe four levels of a cost hierarchy.Ch. 5 - Why is it important to classify costs into a cost...Ch. 5 - What are the key reasons for product cost...Ch. 5 - Prob. 5.8QCh. 5 - Department indirect-cost rates are never...Ch. 5 - Prob. 5.10Q
Ch. 5 - Prob. 5.11QCh. 5 - Prob. 5.12QCh. 5 - Activity-based costing is the wave of the present...Ch. 5 - Increasing the number of indirect-cost pools is...Ch. 5 - The controller of a retail company has just had a...Ch. 5 - Conroe Company is reviewing the data provided by...Ch. 5 - Prob. 5.17MCQCh. 5 - Cost hierarchy. Roberta, Inc., manufactures...Ch. 5 - ABC, cost hierarchy, service. (CMA, adapted)...Ch. 5 - Alternative allocation bases for a professional...Ch. 5 - Plant-wide, department, and ABC Indirect cost...Ch. 5 - Plant-wide, department, and activity-cost rates....Ch. 5 - ABC, process costing. Sander Company produces...Ch. 5 - Department costing, service company. DLN is an...Ch. 5 - Activity-based costing, service company....Ch. 5 - Activity-based costing, manufacturing. Decorative...Ch. 5 - ABC, retail product-line profitability. Fitzgerald...Ch. 5 - Prob. 5.28ECh. 5 - Activity-based costing. The job-costing system at...Ch. 5 - ABC, product costing at banks,...Ch. 5 - Problems 5-31 Job costing with single direct-cost...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - Department and activity-cost rates, service...Ch. 5 - Activity-based costing, merchandising. Pharmahelp,...Ch. 5 - Choosing cost drivers, activity-based costing,...Ch. 5 - ABC, health care. Crosstown Health Center runs two...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - ABC, implementation, ethics. (CMA, adapted) Plum...Ch. 5 - Activity-based costing, activity-based management,...
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