Activity-Based Department Rate Product Costing and Product Cost Distortions Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: Indirect labor $400,400 Subassembly Department 198,800 Final Assembly Department 114,800 Total $714,000 The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Activity Budgeted Activity Cost Activity Base Setup $138,600 Number of setups Quality control 261,800 Number of inspections Total $400,400 The activity-base usage quantities and units produced for the two products follow: Number of Setups Number of Inspections Direct Labor Hours—Subassembly Direct Labor Hours—Final Assembly Units Produced Receivers 80 450 875 525 7,000 Loudspeakers 320 1,750 525 875 7,000 Total 400 2,200 1,400 1,400 14,000 4. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent. Product Total Activity Cost Activity Cost Per Unit Receivers $fill in the blank 11 $fill in the blank 12 Loudspeakers: $fill in the blank 13 $fill in the blank 14
Activity-Based Department Rate Product Costing and Product Cost Distortions Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: Indirect labor $400,400 Subassembly Department 198,800 Final Assembly Department 114,800 Total $714,000 The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Activity Budgeted Activity Cost Activity Base Setup $138,600 Number of setups Quality control 261,800 Number of inspections Total $400,400 The activity-base usage quantities and units produced for the two products follow: Number of Setups Number of Inspections Direct Labor Hours—Subassembly Direct Labor Hours—Final Assembly Units Produced Receivers 80 450 875 525 7,000 Loudspeakers 320 1,750 525 875 7,000 Total 400 2,200 1,400 1,400 14,000 4. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent. Product Total Activity Cost Activity Cost Per Unit Receivers $fill in the blank 11 $fill in the blank 12 Loudspeakers: $fill in the blank 13 $fill in the blank 14
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Activity-Based Department Rate Product Costing and Product Cost Distortions
Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory
Indirect labor | $400,400 |
Subassembly Department | 198,800 |
Final Assembly Department | 114,800 |
Total | $714,000 |
The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows:
Activity | Budgeted Activity Cost | Activity Base | ||||
Setup | $138,600 | Number of setups | ||||
Quality control | 261,800 | Number of inspections | ||||
Total | $400,400 |
The activity-base usage quantities and units produced for the two products follow:
Number of Setups | Number of Inspections | Direct Labor Hours—Subassembly | Direct Labor Hours—Final Assembly | Units Produced | ||||||||||||||||
Receivers | 80 | 450 | 875 | 525 | 7,000 | |||||||||||||||
Loudspeakers | 320 | 1,750 | 525 | 875 | 7,000 | |||||||||||||||
Total | 400 | 2,200 | 1,400 | 1,400 | 14,000 |
4. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent.
Product | Total Activity Cost | Activity Cost Per Unit |
Receivers | $fill in the blank 11 | $fill in the blank 12 |
Loudspeakers: | $fill in the blank 13 | $fill in the blank 14 |
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