MANAGERIAL ACCT FOR MANAGERS CONNECT >I
4th Edition
ISBN: 9781260865325
Author: Noreen
Publisher: MCG
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Chapter 6A, Problem 6A.1E
To determine
Concept introduction:
Activity-based costing is a method of allocation of overhead costs on the basis of different activities and their allocation bases. Under this method, the costs of each activity are allocated to the products on the basis of their allocation rates.
To indicate: The classification of each activity.
Expert Solution & Answer
Explanation of Solution
The classification of each activity is as follows:
| Activity # | Type | |
| a | Batch Level | Raw materials are used for a batch of the product; hence receiving the raw materials is a batch level activity. |
| b | Product level | Management of parts inventory is a product-level activity. |
| c | Unit level | Milling work on the product is done at the unit level. Hence, it is a unit-level activity. |
| d | Organization level | Hiring new employees is an organization level activity. |
| e | Organization level | Designing a new product is an organization level activity. |
| f | Organization level | Performing preventive maintenance of equipment is an organization level activity. |
| g | Organization level | The use of general factory building is an organization level activity. |
| h | Batch Level | Issuing purchase orders for a job is a batch level activity. |
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Students have asked these similar questions
ABC Cost Hierarchy
The following activities occur at Greenwich Corporation, a company that manufactures a variety of products.
a. Receive raw materials from suppliers.
b. Manage parts inventories.
c. Do rough milling work on products.
d. Interview and process new employees in the personnel department.
e. Design new products.
f. Perform periodic preventive maintenance on general-use equipment.
g. Use the general factory building.
h. Issue purchase orders for a job.
Required:
Classify each of the activities above as either a unit-level, batch-level, product-level, or organization-sustaining activity.
You are employed as a research and development manager for a production company. The chief ex- ecutive officer of the company has asked you to generate costing data to better assist in expansionary planning for the company. You are required to generate costs data from the equation below. C(y)=23y2 +12y+8 assume10
Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly.
Support Departments
Producing Departments
HumanResources
GeneralFactory
Fabricating
Assembly
Direct costs
$185,000
$310,000
$114,200
$91,000
Normal activity:
Number of employees
—
50
80
150
Square footage
1,100
—
5,400
13,700
Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated on the basis of square footage. Now assume that Valron Company uses the sequential method to allocate support department costs. The support departments are ranked in order of highest cost to lowest cost.
Required:
1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the sequential method. If an amount is zero, enter "0". Use the rounded values for subsequent calculations.…
Chapter 6A Solutions
MANAGERIAL ACCT FOR MANAGERS CONNECT >I
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