Activity-Based Costing Slack Corporation has the following predicted indirect costs and cost drivers for the year for the given activity cost pools: Maintenance Materials handling Machine setups Inspections Machine hours Material moves Machine setups Inspection hours Fabrication Department Finishing Department Cost Driver Machine hours Material moves $150,000 The following activity predictions were also made for the year: Fabrication Department Finishing Department Direct materials cost Direct labor cost Machine hours (Fabrication) Machine hours (Finishing) Materials moves Machine setups Inspection hours It is assumed that the cost per unit of activity for a given activity does not vary between departments. Slack's president, Charles Slack, is trying to evaluate the company's product mix strategy regarding two of its five product models, ZX300 and SL500. The company has been using a company- wide overhead rate based on machine hours but is considering switching to either department rates or activity-based rates. The production manager has provided the following data for the production of a batch of 100 units for each of these models: Direct materials Direct labor $50,000 30,000 70,000 Manufacturing overhead: Total cost per batch Number of units per batch Cost per unit 10,000 $ 3,000 700 a. Determine the cost of one unit each of ZX300 and SL500, assuming a company-wide overhead rate is used based on total machine hours. Round rate to two decimal places. Overhead rate based on total machine hours 0 Product Costs per Unit ZX300 $ ZX300 SL500 $16,000 $22,000 $5,000 $4,000 500 700 200 100 30 50 5 9 30 60 per machine hour Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number. Round cost per unit to two decimal places. $ 0 $ 0 0 0 $ $40,000 15,000 5,000 Machine setups 25,000 Inspection hours $85,000 0 0 $ SL500 5,000 1,500 50 1,000 0 0 0 0 0 0
Activity-Based Costing Slack Corporation has the following predicted indirect costs and cost drivers for the year for the given activity cost pools: Maintenance Materials handling Machine setups Inspections Machine hours Material moves Machine setups Inspection hours Fabrication Department Finishing Department Cost Driver Machine hours Material moves $150,000 The following activity predictions were also made for the year: Fabrication Department Finishing Department Direct materials cost Direct labor cost Machine hours (Fabrication) Machine hours (Finishing) Materials moves Machine setups Inspection hours It is assumed that the cost per unit of activity for a given activity does not vary between departments. Slack's president, Charles Slack, is trying to evaluate the company's product mix strategy regarding two of its five product models, ZX300 and SL500. The company has been using a company- wide overhead rate based on machine hours but is considering switching to either department rates or activity-based rates. The production manager has provided the following data for the production of a batch of 100 units for each of these models: Direct materials Direct labor $50,000 30,000 70,000 Manufacturing overhead: Total cost per batch Number of units per batch Cost per unit 10,000 $ 3,000 700 a. Determine the cost of one unit each of ZX300 and SL500, assuming a company-wide overhead rate is used based on total machine hours. Round rate to two decimal places. Overhead rate based on total machine hours 0 Product Costs per Unit ZX300 $ ZX300 SL500 $16,000 $22,000 $5,000 $4,000 500 700 200 100 30 50 5 9 30 60 per machine hour Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number. Round cost per unit to two decimal places. $ 0 $ 0 0 0 $ $40,000 15,000 5,000 Machine setups 25,000 Inspection hours $85,000 0 0 $ SL500 5,000 1,500 50 1,000 0 0 0 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Question
Transcribed Image Text:Activity-Based Costing
Slack Corporation has the following predicted indirect costs and cost drivers for the year for the given activity cost pools:
Maintenance
Materials handling
Machine setups
Inspections
Machine hours
Material moves
Machine setups
Inspection hours
Fabrication Department Finishing Department Cost Driver
Machine hours
Material moves
Direct materials cost
Direct labor cost
Machine hours (Fabrication)
Machine hours (Finishing)
Materials moves
Machine setups
Inspection hours
$150,000
The following activity predictions were also made for the year:
Fabrication Department Finishing Department
Direct materials
Direct labor
$50,000
30,000
70,000
It is assumed that the cost per unit of activity for a given activity does not vary between departments. Slack's president, Charles Slack, is trying to
evaluate the company's product mix strategy regarding two of its five product models, ZX300 and SL500. The company has been using a company-
wide overhead rate based on machine hours but is considering switching to either department rates or activity-based rates. The production
manager has provided the following data for the production of a batch of 100 units for each of these models:
Manufacturing overhead:
Total cost per batch
Number of units per batch
Cost per unit
10,000
3,000
700
ZX300 SL500
$16,000 $22,000
$5,000 $4,000
500
700
200
100
30
50
5
9
30
60
Product Costs per Unit
ZX300
$
a. Determine the cost of one unit each of ZX300 and SL500, assuming a company-wide overhead rate is used based on total machine hours.
Round rate to two decimal places.
Overhead rate based on total machine hours 0
$
!
per machine hour
Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number. Round cost per unit to two
decimal places.
$
0 $
0
0
0 $
$40,000
15,000
0
0 $
5,000
Machine setups
25,000 Inspection hours
$85,000
SL500
0
0
0
0
5,000
1,500
50
1,000
0
0
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