Principles of Financial Accounting, Chapters 1-17 - With Access (Looseleaf)
22nd Edition
ISBN: 9781259582394
Author: Wild
Publisher: MCG
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Chapter C, Problem 6QS
To determine
To determine the amount of overhead cost allocated to operating department 1.
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Students have asked these similar questions
Production and cost data
Production and sales units
Selling price (per unit)
Materials (per unit)
Labor (per unit)
Manufacturing overheads
Dept. A
Standrad
192000 24000
$15
1.7
4.3
Dept. B
Designer wear
Number of machine set-ups 4
Marketing overheads
$50
8
14.2
24
Engineering and PC Marketing and CS
745200
1296000
Use single-rate; direct method to allocate engineering and marketing overheads
Engineering overheads include machine setting ($460,800) and inspection ($284,400) activities. Marketing involves channel ($496,000) and branding ($800,000) activities. The inspection and channel costs are driven by
the number of units produced & sold.
Computing product costs and profits under conventional and ABC approaches
A company has the following overhead costs and activities:
Estimated
Expected Activity
Product V Product W Product X
Overhead
Activities and Activity Measures
Machine setups (setups)
Processing customer orders (orders)
Assembling products (assembly-hours) $9,178.00
Cost
$7,234.50
$3,565.50
69
12
10
20
9
21
492
697
111
1. If the company allocates overhead to products using assembly hours as the single
allocation base, how much overhead will be allocated to product X?
A. $1,706
B. $784
C. $618
D. $304
2. How much overhead cost would be assigned to Product V using the activity-based costing
system?
A. $158
B. $91,722
C. $10,385
D. $5,485
Activity Cost Pool
Cost Driver
EstimatedOverhead
Use perProduct A
Use perProduct B
Machine Setups
Setups
$144,000
6,000
2,000
Assembly
Number of Parts
71,000
25,000
46,000
Machine Maintenance
Machine Hours
200,000
13,000
37,000
Compare the overhead allocation using (A) the traditional allocation method and (B) the activity-based costing method. (Hint: the traditional method uses machine hours as the allocation base.) For those boxes in which you must enter subtractive or negative numbers use a minus sign.
Chapter C Solutions
Principles of Financial Accounting, Chapters 1-17 - With Access (Looseleaf)
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- Cost Flows Consider the following independent jobs. Overhead is applied in Department 1 at the rate of 6 per direct labor hour. Overhead is applied in Department 2 at the rate of 8 per machine hour. Direct labor wages average 10 per hour in each department. Required: Fill in the missing data for each job.arrow_forwardOverhead costs are assigned to each product based on __________________. A. the proportion of that products use of the cost driver B. a predetermined overhead rate for a single cost driver C. price of the product D. machine hours per productarrow_forwardCarltons Kitchens three cost pools and overhead estimates are as follows: Compare the overhead allocation using: A. The traditional allocation method B. The activity-based costing method (Hint: the traditional method uses machine hours as the allocation base.)arrow_forward
- Wrappers Tape makes two products: Simple and Removable. It estimates it will produce 369,991 units of Simple and 146,100 of Removable, and the overhead for each of its cost pools is as follows: It has also estimated the activities for each cost driver as follows: Â How much is the overhead allocated to each unit of Simple and Removable?arrow_forwardCaseys Kitchens three cost pools and overhead estimates are as follows: Compare the overhead allocation using: A. The traditional allocation method B. The activity based costing method (Hint: the traditional method uses machine hours as the allocation base.)arrow_forwardActivity-based costing systems: A. use a single predetermined overhead rate based on machine hours instead of on direct labor B. frequently increase the overhead allocation to at least one product while decreasing the overhead allocation to at least one other product C. limit the number of cost pools D. always result in an increase of at least one products selling pricearrow_forward
- Refer to the data in Exercise 7.20. The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Allocate the overhead costs to the producing departments using the sequential method. (Take allocation ratios out to four significant digits. Round allocated costs to the nearest dollar.) 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)arrow_forwardFIFO Method, Single Department Analysis, One Cost Category Refer to the data in Problem 6.33. Required: Prepare a cost of production report for the Fabrication Department for December using the FIFO method of costing.arrow_forwardIce Cool produces two different models of air conditioners. The activities, costs, and cost drivers associated with the production processes follow. Budgeted Budgeted Cost Activity Cost Activity Driver Process Activity Usage Machine hours (MH) Setups $ Assembly Machining 7,800 311,400 20,000 Setups 120 331,400 Finishing Inspecting Inspections 840 226,000 $ 134,000 Support Purchasing Purchase orders 510 Additional production information concerning its two models follows. Units and Activities Units produced Machine hours Setups Inspections Model X Model Z 1,600 2,200 40 3,200 5,600 80 500 340 340 170 Purchase orders Per Unit Model X Model Z Selling price per unit Direct materials cost $ 410 $ 390 150 115 per unit Direct labor cost per unit 125 150 1. Compute the activity rate for each activity using activity-based costing. 2. Using activity-based costing, compute the overhead cost per unit for each model. 3. Compute the total product cost per unit for each model. 4. For each model,…arrow_forward
- E4-14 Venus Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year. $300,000 Direct materials costs Direct labor costs 150,000 Setup time 500,000 Supervision $ 30,000 100,000 Commercial Operating income (loss) $480,000 Overhead costs Revenues $85,000 85,000 Estimated Overhead 90,000 60,000 $85,000 The controller, Peggy Kingman, is concerned about the residential product line. She cannot understand why this line is not more profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential client base resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to the two product lines to determine whether a more accurate product…arrow_forwardQuestion Content Area A company has traditionally allocated its overhead based on machine hours but had collected this information to change to activity-based costing: Estimated Activity Activity Center Product 1 Product 2 Estimated Cost Machine Setups 15 45 $9,600 Assembly Parts 3,000 3,000 144,600 Packaging Pieces 750 600 82,350 Machine Hours per Unit 4 3 Production Volume 750 1,500 A. How much overhead would be allocated to each unit under the traditional allocation method? Round your answers to two decimal places. Product 1 Product 2 Allocation per unit $fill in the blank 1 $fill in the blank 2 B. How much overhead would be allocated to each unit under activity-based costing? Round your answers to two decimal places. Product 1 Product 2 Allocation per unit $fill in the blank 3 $fill in the blank 4arrow_forwardTitle Brahtz Company uses an activity-based costing system. It has the following manufacturing activity ar Description Brahtz Company uses an activity-based costing system. It has the following manufacturing activity areas, related cost drivers and cost allocation rates:ActivityCost DriverCost Allocation RateMachine setupNumber of setups$25.00Materials handlingNumber of parts0.25MachiningMachine hours13.00AssemblyDirect labor hours22.00InspectionNumber of finished units7.00During the month, 100 units were produced, with no defects, requiring three setups. Each unit consisted of 17 parts, 3 direct labor hours and 2.5 machine hours. Direct materials cost $50 per finished unit.What is the total manufacturing cost for inspections?$-0-$700$90$7arrow_forward
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