Homework Help is Here – Start Your Trial Now!
Business
Operations Management
4-19A Apply activity cost allocation rates (Learning Objective 2) Sidney Industries manufactures a variety of custom products. The company has tra- ditionally used a plantwide manufacturing overhead rate based on machine hours to allocate manufacturing overhead to its products. The company estimates that it will incur $2,190,000 in total manufacturing overhead costs in the upcoming year and will use 15,000 machine hours. Up to this point, hazardous waste disposal fees have been absorbed into the plant- wide manufacturing overhead rate and allocated to all products as part of the manu- facturing overhead process. Recently, the company has been experiencing significantly increased waste disposal fees for hazardous waste generated by certain products, and as a result, profit margins on all products have been negatively impacted. Company man- agement wants to implement an activity-based costing system so that managers know the cost of each product, including its hazardous waste disposal costs. Expected usage and costs for manufacturing overhead activities for the upcoming year are as follows: Estimated Activity for This Year Estimated Description of Cost Pool Cost Cost Driver $ 600,000 Number of machine hours Machine maintenance costs. 15,000 $ 270,000 Number of change orders Engineering change orders.. 3,000 Hazardous waste disposal. $1,320,000 Pounds of hazardous materials generated 4,000 Total overhead cost.. $2,190,000 During the year, Job 356 is started and completed. Usage for this job follows: 300 pounds of direct materials at $70 per pound 20 direct labor hours used at $25 per labor hour 90 machine hours used 9 change orders 50 pounds of hazardous waste generated Requirements 1. Calculate the cost of Job 356 using the traditional plantwide manufacturing overhead rate based on machine hours. 2. Calculate the cost of Job 356 using activity-based costing. 3. If you were a manager, which cost estimate would provide you more useful informa-

4-19A Apply activity cost allocation rates (Learning Objective 2) Sidney Industries manufactures a variety of custom products. The company has tra- ditionally used a plantwide manufacturing overhead rate based on machine hours to allocate manufacturing overhead to its products. The company estimates that it will incur $2,190,000 in total manufacturing overhead costs in the upcoming year and will use 15,000 machine hours. Up to this point, hazardous waste disposal fees have been absorbed into the plant- wide manufacturing overhead rate and allocated to all products as part of the manu- facturing overhead process. Recently, the company has been experiencing significantly increased waste disposal fees for hazardous waste generated by certain products, and as a result, profit margins on all products have been negatively impacted. Company man- agement wants to implement an activity-based costing system so that managers know the cost of each product, including its hazardous waste disposal costs. Expected usage and costs for manufacturing overhead activities for the upcoming year are as follows: Estimated Activity for This Year Estimated Description of Cost Pool Cost Cost Driver $ 600,000 Number of machine hours Machine maintenance costs. 15,000 $ 270,000 Number of change orders Engineering change orders.. 3,000 Hazardous waste disposal. $1,320,000 Pounds of hazardous materials generated 4,000 Total overhead cost.. $2,190,000 During the year, Job 356 is started and completed. Usage for this job follows: 300 pounds of direct materials at $70 per pound 20 direct labor hours used at $25 per labor hour 90 machine hours used 9 change orders 50 pounds of hazardous waste generated Requirements 1. Calculate the cost of Job 356 using the traditional plantwide manufacturing overhead rate based on machine hours. 2. Calculate the cost of Job 356 using activity-based costing. 3. If you were a manager, which cost estimate would provide you more useful informa-

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
See similar textbooks
icon
Related questions
Question
E4-19A Apply activity cost allocation rates (Learning Objective 2) Sidney Industries manufactures a variety of custom products. The company has tra- ditionally used a plantwide manufacturing overhead rate based on machine hours to allocate manufacturing overhead to its products. The company estimates that it will incur $2,190,000 in total manufacturing overhead costs in the upcoming year and will use 15,000 machine hours. Up to this point, hazardous waste disposal fees have been absorbed into the plant- wide manufacturing overhead rate and allocated to all products as part of the manu- facturing overhead process. Recently, the company has been experiencing significantly increased waste disposal fees for hazardous waste generated by certain products, and as a result, profit margins on all products have been negatively impacted. Company man- agement wants to implement an activity-based costing system so that managers know the cost of each product, including its hazardous waste disposal costs. Expected usage and costs for manufacturing overhead activities for the upcoming year are as follows: Estimated Estimated Activity for This Year Description of Cost Pool Cost Cost Driver $ 600,000 Number of machine hours Machine maintenance costs . 15,000 Engineering change orders.. $ 270,000 Number of change orders 3,000 Hazardous waste disposal.. $1,320,000 Pounds of hazardous materials generated 4,000 Total overhead cos.. $2,190,000 During the year, Job 356 is started and completed. Usage for this job follows: 300 pounds of direct materials at $70 per pound 20 direct labor hours used at $25 per labor hour 90 machine hours used 9 change orders 50 pounds of hazardous waste generated Requirements 1. Calculate the cost of Job 356 using the traditional plantwide manufacturing overhead rate based on machine hours. 2. Calculate the cost of Job 356 using activity-based costing. 3. If you were a manager, which cost estimate would provide you more useful informa- tion? How might you use this information?
Transcribed Image Text:E4-19A Apply activity cost allocation rates (Learning Objective 2) Sidney Industries manufactures a variety of custom products. The company has tra- ditionally used a plantwide manufacturing overhead rate based on machine hours to allocate manufacturing overhead to its products. The company estimates that it will incur $2,190,000 in total manufacturing overhead costs in the upcoming year and will use 15,000 machine hours. Up to this point, hazardous waste disposal fees have been absorbed into the plant- wide manufacturing overhead rate and allocated to all products as part of the manu- facturing overhead process. Recently, the company has been experiencing significantly increased waste disposal fees for hazardous waste generated by certain products, and as a result, profit margins on all products have been negatively impacted. Company man- agement wants to implement an activity-based costing system so that managers know the cost of each product, including its hazardous waste disposal costs. Expected usage and costs for manufacturing overhead activities for the upcoming year are as follows: Estimated Estimated Activity for This Year Description of Cost Pool Cost Cost Driver $ 600,000 Number of machine hours Machine maintenance costs . 15,000 Engineering change orders.. $ 270,000 Number of change orders 3,000 Hazardous waste disposal.. $1,320,000 Pounds of hazardous materials generated 4,000 Total overhead cos.. $2,190,000 During the year, Job 356 is started and completed. Usage for this job follows: 300 pounds of direct materials at $70 per pound 20 direct labor hours used at $25 per labor hour 90 machine hours used 9 change orders 50 pounds of hazardous waste generated Requirements 1. Calculate the cost of Job 356 using the traditional plantwide manufacturing overhead rate based on machine hours. 2. Calculate the cost of Job 356 using activity-based costing. 3. If you were a manager, which cost estimate would provide you more useful informa- tion? How might you use this information?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
Recommended textbooks for you
Practical Management Science
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Business in Action
Business in Action
Operations Management
ISBN:
9780135198100
Author:
BOVEE
Publisher:
PEARSON CO
Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.
SEE MORE TEXTBOOKS