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$5,536,88048,500114.16$

ABC seems to be a costing approach that identifies activities in an organization and allocates the…

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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You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company's costing system and "do what you can to help us get better control of our manufacturing overhead costs." You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: Actual Cost in March $ 24,200 $ 78,100 Utilities Maintenance Supplies Indirect labor Depreciation Cost Formula $20,600 + $0.10 per machine-hour $40,000 +$1.60 per machine-hour $0.30 per machine-hour $130,000 + $0.70 per machine-hour $70,000 $ 8,400 $ 149,600 $ 71,500 During March, the company worked 26,000 machine-hours and produced 15,000 units. The company had originally planned to work 30,000 machine-hours during March.…
You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: Cost Formula Actual Cost in March Utilities $16,000 + $0.12 per machine-hour $ 19,960 Maintenance $38,700 + $2.00 per machine-hour $ 68,500 Supplies $0.80 per machine-hour $ 14,200 Indirect labor $94,500 + $1.90 per machine-hour $ 129,600 Depreciation $67,800 $ 69,500 During March, the company worked 16,000 machine-hours and produced 10,000 units. The company had originally planned to work 18,000…
es Fiske Corporation manufactures a popular regional brand of kitchen utensils. The design and variety have been fairly constant over the last three years. The managers at Fiske are planning for some changes in the product line next year, but first they want to understand better the relation between activity and factory costs as experienced with the current products. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from the last three years of operations: Quarter 1 2 3 4 5 6 7 8 9 10 11 12 Machine-Hours 18,850 18,590 17,480 19,240 21,280 19,630 19,240 18,850 18,460 20,670 17,550 18,460 Labor-Hours 14,905 15,477 16,720 15,983 17,501 17,369 15,290 14,366 15,994 16,995 14,278 21,244 Required A Required B Factory costs $ 3,388,671 3,425, 136 3,617,144 3,573,240 3,812,284 3,777,312 3,531,726 3,369,102 3,512,487 3,730,734 2,898,315 3,723,786 K Required: a. Use the high-low method to estimate…
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 119,000 units of the Sport model and 49,500 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 one-third. Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility Activity Cost Driver Cost Driver Volume Sport Pro Total Assembly building Assembling Machine-hours 7,900 31,900 39,800 Setting up machines Setup hours 59 590 649 Handling material Production runs 27 59 86 Packaging building Inspecting and…
Carlton's Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to manufacture 70,000 units of Strands, which has a per-unit direct material cost of $8 and a per-unit direct labor cost of $75. It also expects to manufacture 30,000 units of Shapes, which has a per-unit material cost of $12 and a per-unit direct labor cost of $50. It is estimated that Strands will use 140,000 machine hours and Shapes will require 60,000 machine hours. Historically, the company has used the traditional allocation method and applied overhead at a rate of $10.79 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is shown: Machine Setups $67,500 Machine Processing 2,000,000 Material Requisitions 90,000 Total Overhead $2,157,500 The cost driver for each cost pool and its expected activity is shown: Strands Shapes Total Machine Setups 90 180 270 Machine Hours 140,000 60,000 200,000 Parts Requisitions 80…
You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: Cost Formula Actual Cost in March Utilities $16,000 + $0.21 per machine-hour $ 23,050 Maintenance $38,200 + $1.80 per machine-hour $ 77,000 Supplies $0.80 per machine-hour $ 19,800 Indirect labor $94,800 + $1.60 per machine-hour $ 135,700 Depreciation $67,900 $ 69,600 During March, the company worked 23,000 machine-hours and produced 17,000 units. The company had originally planned to work 25,000…
Dover’s engineers have developed a method that would lower the printing department’s rate of defective products to 6% at the printing operation. Implementing the new method would cost $1,400,000 per month. Should Dover implement the change? Show your calculations.
The following information is used for the question below. HakardPewlitt is producing a new model of laser printer, the Id10t. A year after the Id10t had been released, you have been given data on how well your workforce is producing. After looking at the numbers, you decide that you should figure out the variances in relation to your production team. The standard labour cost is $13.75 after pay, taxes, and benefits. You were surprised to see that the actual rate turned out to be $14.50. The actual number of hours your employees worked was 7800, but you know that the standard for the level of production (650 casings) is 7500 hours. Labour Efficiency Variance is: $4 125 Unfavourable $4 125 Favourable $4 125 $4 125
Fiske Corporation manufactures a popular regional brand of kitchen utensils. The design and variety have been fairly constant over the last three years. The managers at Fiske are planning for some changes in the product line next year, but first they want to understand better the relation between activity and factory costs as experienced with the current products. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from the last three years of operations: Quarter 1 2 3 4 5 6 7 8 9 10 11 12 Machine-Hours 18,850 18,590 17,480 19,240 21,280 19,630 19,240 18,850 18,460 20,670 17,550 18,460 Labor-Hours 14,905 15,477 16,720 15,983 17,501 17,369 15,290 14,366 15,994 16,995 14,278 18,644 Factory costs $ 3,388,671 3,425, 136 3,617,144 3,573,240 3,812, 284 3,777,312 3,531,726 3,369,102 3,512,487 3,730, 734 3,206,415 3,723,786 Required: a. Use the high-low method to estimate the fixed and variable…
Tarnish Industries produces miniature models of farm equipment. These collectibles are in great demand. It takes two operations, molding and finishing, to complete the miniatures. Next year's expected activities are shown in the following table: Molding Finishing Direct labor hours 75,000 DLH 160,500 DLH Machine hours 98,000 MH 81,500 MH Tarnish Industries uses departmental overhead rates and is planning on a $1.80 per direct labor hour overhead rate for the Finishing department. Compute the budgeted manufacturing overhead cost for the Finishing department given the information shown in the table.
Vitamin-Sea is a company that specializes in making tents for beach tourism. Vitamin-Sea wants all of its customers to feel comfortable when traveling to the beach. The company aims to sell 3,000 units of tents at a selling price of $ 50 in July. They certainly have employees and also direct labor who help the production, with the formula for calculating salaries and wages is $ 2,000 for fixed costs and $ 20 for variable costs. For tent-making materials, parachutes are used for $ 3 and maintenance equipment is $ 5 per unit. In addition to Utilities for $ 1,500 for July, Factory and Office Rent for $ 10,000, Equipment Depreciation for $ 20,000 and insurance for $ 1,500. All variable cost are counted based on unit produce and sold. At the end of July, here are the actual results obtained by Vitamin-Sea: | Actual Result Quantity produced and sold 3,500 200,000 Revenue Expenses |Wages and Salaries Direct Material Equipment maintenance Utilities Factory and Office Rent Equipment…
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