After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility,Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups.He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability.He plans to produce 117,000 units of the Sport model and 48,500 units of the Pro model in the first quarter. He believes that with hismore efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 18 percent.Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing FacilityActivityAssembly buildingAssemblingSetting up machinesHandling materialPackaging buildingInspecting and packingShippingDirect materialDirect laborAssemblyPackagingTotal direct laborDirect costsOverheadAssembly buildingTotal ABC costNumber of unitsUnit costCost DriverAssembling (@ $30 per MH)Setting up machine (@ $900 per setup hour)Handling material (@ $3,000 per run)Machine-hoursSetup hoursProduction runs.Packaging buildingInspecting and packing (@ $5 per direct labor-hour)Shipping (@$1,320 per shipment)Total ABC overheadModelSportProDirect labor-hoursNumber of shipmentsTotal ABCOverheadThird Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing FacilitySport$1,517,000Cost Driver VolumeProSport7,700572566,80011731,7005705726,200234$ 767,0001,007,000$1,774,000$3,291,000$ 231,00051,30075,000$334,000154,440$845,740$4,136,740Total117,00035.3639,4006278293,000351Pro$2,434,000634,000394,000$1,028,000$3,462,000$$ 951,000513,000171,000Required:a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing.Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost ofa setup hour remains at $900.131,000308,880$2,074,880$5,536,88048,500114.16$

After reviewing the new activity-based costing system that Nancy Chen has Implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 117,000 units of the Sport model and 48,500 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 18 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Cost Driver Activity Assembly building Assembling Setting up machines. Handling material Packaging building Inspecting and packing Shipping Machine-hours Setup hours Production runs Direct material Direct labor Direct labor-hours Number of shipments Sport Cost Driver Volume Pro 7,700 57 25 66,800 117 31,700 570 57 26,200 234 Total 39,400 627 82 93,000 351 Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,517,000 Pro $2,434,000

After reviewing the new activity-based costing system that Nancy Chen has Implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 117,000 units of the Sport model and 48,500 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 18 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Cost Driver Activity Assembly building Assembling Setting up machines. Handling material Packaging building Inspecting and packing Shipping Machine-hours Setup hours Production runs Direct material Direct labor Direct labor-hours Number of shipments Sport Cost Driver Volume Pro 7,700 57 25 66,800 117 31,700 570 57 26,200 234 Total 39,400 627 82 93,000 351 Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,517,000 Pro $2,434,000

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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