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4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 6-8. (Hint: Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses, and common fixed expenses.)

4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 6-8. (Hint: Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses, and common fixed expenses.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please help me with Req 4. I believe something is missing or incorrect from it. Thanks! :) If you zoom in I believe you can see the info more clearly.

decimal places.) Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars): Basic 20,00e Advanced Total Number of units produced and sold 10,000 30.eee $3.000, eee 2,300.000 700,000 720,000 $ 5,000, eee 3,650, e00 1,350.000 1,200, e0e Sales Cost of goods sold Gross margin Selling and administrative expenses $2.000,e0e 1,350,000 650,000 480,000 $ (20,000) $ 170,000 $ 150,000 Net operating income (loss) Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company's Molding Department would be allocated based on machine-hours and the overhead costs in its Assemble and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information: Assenble and Pack Molding $ 787,5ee Total Manufacturing overhead costs Direct labor hours: $ 562,500 $1350,000 Basic 10,000 5,000 20,e00 1e,e00 30,000 15,000 Advanced Machine hours Basic Advanced 12,e00 10,000 12,000 10,000 Required: 1. Using the plantwide approach: a. Calculate the plantwide overhead rate. b. Calculate the amount of overhead that would be assigned to each product. 2. Using a departmental approach: a. Calculate the departmental overhead rates. b. Calculate the total amount of overhead that would be assigned to each product. c. Using your departmental overhead cost allocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). 3. Koontz's production manager has suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the company's total manufacturing overhead cost to five activity cost pools as follows: Manufacturing Overhead $ 417.500 282, 5e0 Activity Cost Pool Machining Assemble and pack Order processing Setups Other (unused capacity) Activity Measure Machine-hours in Molding Direct labor-hours in Assemble and Pack Number of customer orders Setup hours 230,000 340.000 88, 000 $1,350,eee She also determined that the average order size for the Basic and Advanced models is 400 units and 50 units, respectively. The molding machines require a setup for each order. One setup hour is required for each customer order of the Basic model and three hours are required to setup for an order of the Advanced model. The company pays a sales commissions of 5% for the Basic model and 10% for the Advanced model. Its traceable fixed advertising costs include $150,000 for the Basic model and $200,000 for the Advanced model. The remainder of the company's selling and administrative costs are organization-sustaining in nature. Using the additional information provided by the production manager, calculate: a. An activity rate for each activity cost pool. b. The total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approach. c. The total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. 4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 6-8. (Hint: Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses, and common fixed expenses.) 5. Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model. Reg 1A Reg 18 Reg 2A Req 28 Reg 20 Reg 3A Reg 38 Reg 3C Reg 4 Reg 5 Calculate the plantwide overhead rate. Plantwide overhead rate s 30 per DLH Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate the amount of overhead that would be assigned to each product. Basic Advanced Amount of overhead s 900.000 s 450,000 Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate the departmental overhead rates. (Round your answers to 2 decimal places.) Molding Department 35.80 per MHS Assemble and Pack Department Manufacturing overhead rates 18.75 per DLH Reg 26 Reg 3A Reg 1A Reg 18 Reg 2A Req 20 Reg 3B Reg 30 Reg 4 Reg 5 Calculate the total amount of overhead that would be assigned to each product. (Round your intermediate calculations to 2 decimal places.). Basic Advanced Molding Department Assemble and Pack Department Total manufacturing overhead assigned 429,600s 358,000 375,000 187,500 804,600 S 545.500
Transcribed Image Text:decimal places.) Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars): Basic 20,00e Advanced Total Number of units produced and sold 10,000 30.eee $3.000, eee 2,300.000 700,000 720,000 $ 5,000, eee 3,650, e00 1,350.000 1,200, e0e Sales Cost of goods sold Gross margin Selling and administrative expenses $2.000,e0e 1,350,000 650,000 480,000 $ (20,000) $ 170,000 $ 150,000 Net operating income (loss) Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company's Molding Department would be allocated based on machine-hours and the overhead costs in its Assemble and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information: Assenble and Pack Molding $ 787,5ee Total Manufacturing overhead costs Direct labor hours: $ 562,500 $1350,000 Basic 10,000 5,000 20,e00 1e,e00 30,000 15,000 Advanced Machine hours Basic Advanced 12,e00 10,000 12,000 10,000 Required: 1. Using the plantwide approach: a. Calculate the plantwide overhead rate. b. Calculate the amount of overhead that would be assigned to each product. 2. Using a departmental approach: a. Calculate the departmental overhead rates. b. Calculate the total amount of overhead that would be assigned to each product. c. Using your departmental overhead cost allocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). 3. Koontz's production manager has suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the company's total manufacturing overhead cost to five activity cost pools as follows: Manufacturing Overhead $ 417.500 282, 5e0 Activity Cost Pool Machining Assemble and pack Order processing Setups Other (unused capacity) Activity Measure Machine-hours in Molding Direct labor-hours in Assemble and Pack Number of customer orders Setup hours 230,000 340.000 88, 000 $1,350,eee She also determined that the average order size for the Basic and Advanced models is 400 units and 50 units, respectively. The molding machines require a setup for each order. One setup hour is required for each customer order of the Basic model and three hours are required to setup for an order of the Advanced model. The company pays a sales commissions of 5% for the Basic model and 10% for the Advanced model. Its traceable fixed advertising costs include $150,000 for the Basic model and $200,000 for the Advanced model. The remainder of the company's selling and administrative costs are organization-sustaining in nature. Using the additional information provided by the production manager, calculate: a. An activity rate for each activity cost pool. b. The total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approach. c. The total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. 4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 6-8. (Hint: Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses, and common fixed expenses.) 5. Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model. Reg 1A Reg 18 Reg 2A Req 28 Reg 20 Reg 3A Reg 38 Reg 3C Reg 4 Reg 5 Calculate the plantwide overhead rate. Plantwide overhead rate s 30 per DLH Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate the amount of overhead that would be assigned to each product. Basic Advanced Amount of overhead s 900.000 s 450,000 Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate the departmental overhead rates. (Round your answers to 2 decimal places.) Molding Department 35.80 per MHS Assemble and Pack Department Manufacturing overhead rates 18.75 per DLH Reg 26 Reg 3A Reg 1A Reg 18 Reg 2A Req 20 Reg 3B Reg 30 Reg 4 Reg 5 Calculate the total amount of overhead that would be assigned to each product. (Round your intermediate calculations to 2 decimal places.). Basic Advanced Molding Department Assemble and Pack Department Total manufacturing overhead assigned 429,600s 358,000 375,000 187,500 804,600 S 545.500
Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Using your departmental overhead cost allocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). (Round your intermediate calculations to 2 decimal places.) Basic Advanced Sales $ 3,000,000 s 2.000,000 2.204,600 Cost of goods sold Gross margin Seling and administrative expenses 1,445,500 554,500 480,000 S 795,400 720,000 Net operating income 75.400 74,500 Reg 1A Reg 18 Req 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate an activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Activity Rate Machining 18.98 per MH Assemble and pack 9.42 per DLH Order processing Setups 920.00 per order 523.08 per hour Req 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Req 4 Reg 5 Calculate the total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity- based approach. (Round your Intermediate calculations to 2 decimal places.) Basic Advanced Machining $ 227.700rs 189.800 188,400 46.000 Assemble and pack 94.200 Order processing Setups 184.000 26,154 488.314 S 313.848 Total overhead cost assigned $ 781.848 Reg 1A Reg 18 Reg 2A Reg 2B Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate the total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. Basic Advanced Total traceable selling and administrative cost 300.000s 400.000 Reg 1A Reg 18 Reg 2A Req 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 6-8. (Hint: Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses, and common fixed expenses.) (Round your intermediate calculations to 2 decimal places.) Show less a Koontz Company Income statement Total Basic Advanced Total Basic Advanced Sales $ 5,000,000 s 3,000,000 s 2,000,000 Variable expenses: Direct materials 1,400,000 800,000 600,000 Direct labor 900,000 600,000 300,000 2,650,000 2,350,000 Total variable expenses 1,400,000 900,000 Contribution margin 1,600,000 1,100,000 Traceable fixed expenses: Machining 417,560 227,760 189,800 Assemble and pack 282,600 188,400 94,200 Order processing 230,000 46,000 184,000 Setups Advertising 340,002 26,154 313,848 350,000 150,000 200,000 Total traceable fixed expenses 1,620,162 638,314 981,848 Segment margin 729,838 S 961,686 $ 118,152 Common fixed expenses: Selling and administrative 500,000 Other 80,000 Total common fixed expenses 580,000 Net operating income 149,838
Transcribed Image Text:Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Using your departmental overhead cost allocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). (Round your intermediate calculations to 2 decimal places.) Basic Advanced Sales $ 3,000,000 s 2.000,000 2.204,600 Cost of goods sold Gross margin Seling and administrative expenses 1,445,500 554,500 480,000 S 795,400 720,000 Net operating income 75.400 74,500 Reg 1A Reg 18 Req 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate an activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Activity Rate Machining 18.98 per MH Assemble and pack 9.42 per DLH Order processing Setups 920.00 per order 523.08 per hour Req 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Req 4 Reg 5 Calculate the total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity- based approach. (Round your Intermediate calculations to 2 decimal places.) Basic Advanced Machining $ 227.700rs 189.800 188,400 46.000 Assemble and pack 94.200 Order processing Setups 184.000 26,154 488.314 S 313.848 Total overhead cost assigned $ 781.848 Reg 1A Reg 18 Reg 2A Reg 2B Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate the total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. Basic Advanced Total traceable selling and administrative cost 300.000s 400.000 Reg 1A Reg 18 Reg 2A Req 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 6-8. (Hint: Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses, and common fixed expenses.) (Round your intermediate calculations to 2 decimal places.) Show less a Koontz Company Income statement Total Basic Advanced Total Basic Advanced Sales $ 5,000,000 s 3,000,000 s 2,000,000 Variable expenses: Direct materials 1,400,000 800,000 600,000 Direct labor 900,000 600,000 300,000 2,650,000 2,350,000 Total variable expenses 1,400,000 900,000 Contribution margin 1,600,000 1,100,000 Traceable fixed expenses: Machining 417,560 227,760 189,800 Assemble and pack 282,600 188,400 94,200 Order processing 230,000 46,000 184,000 Setups Advertising 340,002 26,154 313,848 350,000 150,000 200,000 Total traceable fixed expenses 1,620,162 638,314 981,848 Segment margin 729,838 S 961,686 $ 118,152 Common fixed expenses: Selling and administrative 500,000 Other 80,000 Total common fixed expenses 580,000 Net operating income 149,838
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