Unit 3 Exercise Assignment
docx
keyboard_arrow_up
School
Yorkville University *
*We aren’t endorsed by this school
Course
2083
Subject
Industrial Engineering
Date
Feb 20, 2024
Type
docx
Pages
8
Uploaded by AgentJaguar3705
Unit 3 Exercise Assignment
Jacky Siu Ming Luk
Yorkville University
BUSI2083-24W-O-C
Mohammed Nurul Alam
Jan 24, 2024
Question 3.1
White Wizard Company makes golf equipment for retailers
around the world. Below you will find a number of activities
and cost at White Wizard Company. Requir
ed:
1.
Please list the activity as either, “Batch”, “Unit”,
“Product”, “Facility”, or “Organization-sustaining”. Activity
Level
1)
Factory utilities
Facility
2)
A steering wheel is installed in a
golf cart.
1. Unit
3)
Machine set-up.
Batch
4)
Completed golf carts are
individually tested on the
company’s test track.
1. Unit
5)
Molding and sanding each unit
of product
Batch
6)
An outside lawyer draws up a
new generic sales contract for
the company, limiting Go Pro’s
liability in case of accidents that
involve its golf carts.
Organization-sustaining”. 7)
Electricity is used to heat and
light the factory and the
administrative offices.
Facility
8)
A golf cart is painted.
1. Unit
9)
Research and development
rganization-sustaining
10)
The company’s engineer
modifies the design of a model
to eliminate a potential safety
problem.
rganization-sustaining
Question 3.2
Perfect Flooring installs oak and other hardwood floors in homes and businesses. The company
uses an activity-based costing system for its overhead costs. The company has provided the
following data concerning its annual overhead costs and its activity-based costing system:
Overhead Costs:
Production
overhead
$190,000
Office expense
140,000
Total
$330,000
Distribution of resource consumption:
Activity Cost Pools
Installing Floors
Job Support
Other
Total
Production
overhead
40%
40%
20%
100%
Office expenses
10%
60%
30%
100%
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining
costs. The amount of activity for the year is as follows:
Activity Cost Pool
Annual Activity
Installing floors
200 squares
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Job support
160 jobs
Other
Not applicable
A "square" is a measure of area that is roughly equivalent to 1,000 square metres.
Required
:
1.
Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the
table below:
TOTAL*RATE
Installing Floors
Job Support
Other
Total
Production
overhead
76000
76000
38000
$190,000
Office expense
14000
84000
42000
140,000
Total
90000
160000
80000
$330,000
2.
Compute the activity rates (i.e., cost per unit of activity) for the Installing Floors and Job
Support activity cost pools by filling in the table below:
Installing Floors
Job Support
Production
overhead
380
475
Office expense
70
525
Total
450
1000
PART1/ANNUAL
ACT
3.
Compute the overhead cost, according to the activity-based costing system, of a job that
involves installing 3.4 squares.
Installing Floors
3.4
Job Support
Production overhead
380
1292
475
Office expense
70
238
525
Total
450
1530
1000
TOTAL COST
2530
Question 3.3
Lightsaber, Inc. manufactures two models of high-pressure steam valves, the BB7 model and the BB8 model. Budgeted manufacturing overhead cost and operating data regarding production and sales of 2,000 units of the BB7 model and 8,000 units of the BB8 model for 2023 follow:
Budgeted Level for Cost Driver
Activity Cost Pool
Budgeted Overhead Costs
Cost Driver
BB7
BB8
Total
Machine setups
$800,000
Number of setups
150
100
250
Vendor negotiation
200,000
Number of parts
800
200
1,000
Assembly
400,000
Direct labour hours
4,00
0
36,0
00
40,000
$1,400,000
Required
:
1.
Identify and
briefly explain each of the three cost drivers as either unit-
level or batch-level or product-level or organization-sustaining level.
Machine setups
BATCH
HAS TO SET UP REGARDLESS OF HOW MANY PRODUCT Vendor negotiation
PRODUCT level.
VENDER PROVIDE PARTS relate to specific products Assembly
UNIT-level
EACH UNIT HAS TO BE ASSEMBLED 2.
Calculate the budgeted manufacturing overhead cost for each unit of the two models, using only one unit-level cost driver.
Predetermind rate
1400000/40
000
35
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
TOTAL CSOT
UNIT COS
T PER UNIT
BB7
4000
140000
2000
70
BB8
36000
1260000
8000
157.
5
P RATE* HOUR USED
TOTA
L COS
T /UNI
T 3.
Calculate the budgeted manufacturing overhead cost for each unit of the two models, using the activity-based-costing (ABC) method.
Activity Cost Pool
Budgeted Overhead Costs
Cost Driver
Total
PER UNIT
Machine setups
800000
Number of setups
250
3200
TOTAL COST /COST DRIVER Vendor negotiation
200000
Number of parts
1000
200
Assembly
400000
Direct labour hours
4000
0
10
1400000
BB7
BB8
150
480000
100
3200
00
UNIT USED*COST PER UNIT 800
160000
200
4000
0
4000
40000
36000
3600
00
TOTAL
680000
7200
00
1400
000
UNITS
2000
8000
COST PER UNIT 340
90
4.
Assume Lightsaber, Inc. will use only the unit-level driver. Compared to
the ABC method, by how much (in terms of total allocated/applied manufacturing overhead cost), if any, will the total output of each model be either under-costed or over-costed?
BB7
BB8
UNIT LEVEL
140000
1260000
ABC
680000
720000
-540000
540000
540000 UNDER COST
540000 OVER COST
5.
Is the result obtained in part (4) above consistent with your expectations?
Explain.
YES, UNIT LEVEL HAS A LIMITATION OF UNDER COST PRODUCT WITH LESS UNIT PRODUCTED WHILE OVERCOSTING UNIT WITH LARGER PRODUCTION