Activity-Based Costing Steampunk Corporation has the following predicted indirect costs and cost drivers for the upcoming year for the given activity cost pools: Fabrication Finishing Department Department $30,000 15,000 22,500 Material moves 45,000 105,000 7,500 Machine setups 37,500 Inspection hours Total $180,000 $82,500 The following activity predictions were also made for the year: Maintenance Materials handling Machine Inspections Machine hours Material moves Machine setups Inspection hours Fabrication Finishing Department Department 2,500 750 25 500 It is assumed that the cost per unit of activity for a given activity does not vary between departments. Steampunk's president, Abner Punk, is trying to evaluate the company's product mix strategy regarding two of its product models, SW100 and SG150. The company has been using a company wide overhead rate based on machine hours but is considering switching to either department rates of 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 cost Direct labor cost 5,000 1,500 350 Machine hours (Fabrication) Machine hours (Finishing) Materials moves Machine setups SW100 SG150 $10,000 $15,000 $ 4,000 $3,000 250 100 20 5 Cost Driver Machine hours 350 50 40 10
Activity-Based Costing Steampunk Corporation has the following predicted indirect costs and cost drivers for the upcoming year for the given activity cost pools: Fabrication Finishing Department Department $30,000 15,000 22,500 Material moves 45,000 105,000 7,500 Machine setups 37,500 Inspection hours Total $180,000 $82,500 The following activity predictions were also made for the year: Maintenance Materials handling Machine Inspections Machine hours Material moves Machine setups Inspection hours Fabrication Finishing Department Department 2,500 750 25 500 It is assumed that the cost per unit of activity for a given activity does not vary between departments. Steampunk's president, Abner Punk, is trying to evaluate the company's product mix strategy regarding two of its product models, SW100 and SG150. The company has been using a company wide overhead rate based on machine hours but is considering switching to either department rates of 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 cost Direct labor cost 5,000 1,500 350 Machine hours (Fabrication) Machine hours (Finishing) Materials moves Machine setups SW100 SG150 $10,000 $15,000 $ 4,000 $3,000 250 100 20 5 Cost Driver Machine hours 350 50 40 10
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.
Topic Video
Question
Transcribed Image Text:10
Machine setups
Inspection hours
15
30
a. Determine the cost of one unit each of SW100 and SG150, 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 Xper machine hour
Use rounded overhead rate calculated about for calculations below. Round cost answers to the nearest whole number. Round cost per unit to two decimal places.
Product Costs per Unit
SW100
SG150
Direct materials
Direct labor
$
0x
0 x $
0 x
0 x
0 x
Manufacturing overhead
0 x
Total cost per batch
0x $
0 x
Number of units per batch
0x
0x
Cost per unit
$
0 x $
0x
b. Determine the cost of one unit of SW100 and SG150, assuming department overhead rates are used. Overhead is assigned based on machine hours in both departments.
Round to two decimal places, if applicable.
Overhead rate based on machine hours for Fabrication Dept.: $ 0
5
$
$
Overhead rate based on machine hours for Finishing Dept.: $ 0
Xper machine hour.
Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number, when needed. Round cost per unit to two decimal places, if needed.
Product Costs per Unit
SW100
SG150
Direct materials
Direct labor
Manufacturing overboad:
0 x $
0 x
Xper machine hour.
0 x
0 x
Transcribed Image Text:Activity-Based Costing
Steampunk Corporation has the following predicted indirect costs and cost drivers for the upcoming year for the given activity cost pools:
Fabrication
Finishing
Department Department Cost Driver
$ 30,000
15,000 Machine hours
22,500 Material moves
45,000
105,000
7,500 Machine setups
37,500 Inspection hours
Total
$180,000
$82,500
The following activity predictions were also made for the year:
Maintenance
Materials handling
Machine
Inspections
Fabrication Finishing
Department Department
5,000
2,500
1,500
750
25
500
It is assumed that the cost per unit of activity for a given activity does not vary between departments. Steampunk's president, Abner Punk, is trying to evaluate the company's product mix
strategy regarding two of its product models, SW100 and SG150. The company has been using a company wide overhead rate based on machine hours but is considering switching to
either department rates of 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:
Machine hours
Material moves
Machine setups
Inspection hours
350
Direct materials cost
Direct labor cost
Machine hours (Fabrication)
Machine hours (Finishing)
Materials moves
Machine setups
Inspection hours
SW100 SG150
$10,000 $15,000
$4,000 $3,000
350
50
40
10
20
250
100
20
5
15
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