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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Textbook Question
Chapter 5, Problem 5.29E
Activity-based costing. The
Information related to Job 220 and Job 330 follows. Job 220 incurs more batch-level costs because it uses more types of materials that need to be purchased, moved, and inspected relative to Job 330.
| Job 220 | Job 330 | |
| Number of purchase orders | 21 | 9 |
| Number of material moves | 18 | 6 |
| Machine-hours | 30 | 70 |
| Number of inspections | 10 | 2 |
| Units produced | 17 | 5 |
- 1. Compute the total overhead allocated to each job under a simple costing system, where overhead is allocated based on machine-hours.
Required
- 2. Compute the total overhead allocated to each job under an activity-based costing system using the appropriate activity drivers.
- 3. Explain why Melody’s Custom Framing might favor the ABC job-costing system over the simple job-costing system, especially in its bidding process.
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Students have asked these similar questions
The job costing system at Siobhan's Custom Framing has five indirect cost pools (purchasing, material handling, machine maintenance, product inspection, and packaging). The company is in the process of bidding on two jobs; Job 215, an order of 14 intricate personalized frames, and Job 325, an order of 7 standard personalized frames. The controller wants you to compare overhead allocated under the current simple job-costing system and a newly designed activity-based job-costing system. Total budgeted costs in each indirect cost pool and the budgeted quantity of activity driver are as follows.
Budgeted Overhead
Activity Driver
Budgeted Quantity of Activity Driver
Purchasing
$36,100
Purchased orders processed
1,900
Material handling
38,400
Material moves
4,800
Machine maintenance
160,000
Machine-hours
10,000
Product inspection
4,000
Inspections
1,000
Packaging
21,600
Units produced
3,600
Total
$260,100…
Activity-based costing. The job-costing system at Melody’s Custom Framing has ve indirect cost pools (purchasing, material handling, machine maintenance, product inspection, and packaging). The company is in the process of bidding on two jobs: Job 220, an order of 17 intricate personalized frames, and Job 330, an order of 5 standard personalized frames. The controller wants you to compare overhead allocated under the current simple job-costing system and a newly designed activity-based job-costing system. Total budgeted costs in each indirect-cost pool and the budgeted quantity of activity driver are as follows.
Aragon
makes handheld calculators in two models--basic and professional--and wants to refine its costing system by allocating overhead using departmental rates. The estimated
$1,149,500
of manufacturing overhead has been divided into two cost pools: Assembly Department and Packaging Department. The following data have been compiled:
LOADING...
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requirements
LOADING...
.
Compute the predetermined overhead allocation rates using machine hours as the allocation base for the Assembly Department and direct labor hours for the Packaging Department.
Begin by selecting the formula to calculate the predetermined overhead (OH) allocation rate. Then enter the amounts to compute the allocation rate for each department. (Abbreviation used: Qty = quantity. Enter the allocation rates to the nearest cent.)
Predetermined OH
Estimated overhead costs
÷
Estimated qty of the allocation base
=…
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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