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 105,000 units of the Sport model and 42,500 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 Assembly building Assembling Cost Driver Sport Cost Driver Volume Pro Total Setting up machines Handling material Packaging building Inspecting and packing Shipping Machine-hours Setup hours Production runs Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility 6,500 45 13 30,500 450 45 37,000 495 58 Direct labor-hours Number of shipments 62,000 23,800 105 210 85,800 315 Direct material Direct labor Assembly Packaging Total direct labor Sport $ 1,505,000 $ 755,000 995,000 $ 1,750,000 $ 3,255,000 Pro $ 2,410,000 $ 610,000 370,000 $ 980,000 $ 3,390,000 Direct costs Overhead Assembly building Assembling (@ $30 per MH) Setting up machines (@ $900 per setup hour) Handling material (@ $3,000 per run) Packaging building Inspecting and packing (@ $5 per direct labor-hour) Shipping (@ $1,320 per shipment) Total ABC overhead Total ABC cost Number of units Unit cost Required: $ 195,000 40,500 39,000 310,000 138,600 $ 723,100 $ 3,978,100 105,000 $ 37.89 $ 915,000 405,000 135,000 119,000 277,200 $ 1,851,200 $ 5,241,200 42,500 $ 123.32 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 of a setup hour remains at $900. Model Total ABC Overhead Sport Pro

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 105,000 units of the Sport model and 42,500 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 Assembly building Assembling Cost Driver Sport Cost Driver Volume Pro Total Setting up machines Handling material Packaging building Inspecting and packing Shipping Machine-hours Setup hours Production runs Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility 6,500 45 13 30,500 450 45 37,000 495 58 Direct labor-hours Number of shipments 62,000 23,800 105 210 85,800 315 Direct material Direct labor Assembly Packaging Total direct labor Sport $ 1,505,000 $ 755,000 995,000 $ 1,750,000 $ 3,255,000 Pro $ 2,410,000 $ 610,000 370,000 $ 980,000 $ 3,390,000 Direct costs Overhead Assembly building Assembling (@ $30 per MH) Setting up machines (@ $900 per setup hour) Handling material (@ $3,000 per run) Packaging building Inspecting and packing (@ $5 per direct labor-hour) Shipping (@ $1,320 per shipment) Total ABC overhead Total ABC cost Number of units Unit cost Required: $ 195,000 40,500 39,000 310,000 138,600 $ 723,100 $ 3,978,100 105,000 $ 37.89 $ 915,000 405,000 135,000 119,000 277,200 $ 1,851,200 $ 5,241,200 42,500 $ 123.32 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 of a setup hour remains at $900. Model Total ABC Overhead Sport Pro

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter13: Emerging Topics In Managerial Accounting

Section: Chapter Questions

Problem 31BEB: Gumbrecht Company has the following departmental manufacturing layout for one of its plants: A...

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