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 104,000 units of the Sport model and 42,000 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 29 percent. Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility Cost Driver Volume Activity Cost Driver Sport Pro Total Assembly building Assembling Machine-hours 6,400 30,400 36,800 Setting up machines Setup hours 44 440 484 Handling material Production runs 12 44 56 Packaging building Inspecting and packing Direct labor-hours 61,600 23,600 85,200 Shipping Number of shipments 104 208 312 Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility Sport Pro Direct material $ 1,504,000 $ 2,408,000 Direct labor Assembly $ 754,000 $ 608,000 Packaging 994,000 368,000 Total direct labor $ 1,748,000 $ 976,000 Direct costs $ 3,252,000 $ 3,384,000 Overhead Assembly building Assembling (@ $30 per MH) $ 192,000 $ 912,000 Setting up machine (@ $900 per setup hour) 39,600 396,000 Handling material (@ $3,000 per run) 36,000 132,000 Packaging building Inspecting and packing (@ $5 per direct labor-hour) 308,000 118,000 Shipping (@ $1,320 per shipment) 137,280 274,560 Total ABC overhead $ 712,880 $ 1,832,560 Total ABC cost $ 3,964,880 $ 5,216,560 Number of units 104,000 42,000 Unit cost $ 38.12 $ 124.20 Required: 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 104,000 units of the Sport model and 42,000 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 29 percent. Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility Cost Driver Volume Activity Cost Driver Sport Pro Total Assembly building Assembling Machine-hours 6,400 30,400 36,800 Setting up machines Setup hours 44 440 484 Handling material Production runs 12 44 56 Packaging building Inspecting and packing Direct labor-hours 61,600 23,600 85,200 Shipping Number of shipments 104 208 312 Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility Sport Pro Direct material $ 1,504,000 $ 2,408,000 Direct labor Assembly $ 754,000 $ 608,000 Packaging 994,000 368,000 Total direct labor $ 1,748,000 $ 976,000 Direct costs $ 3,252,000 $ 3,384,000 Overhead Assembly building Assembling (@ $30 per MH) $ 192,000 $ 912,000 Setting up machine (@ $900 per setup hour) 39,600 396,000 Handling material (@ $3,000 per run) 36,000 132,000 Packaging building Inspecting and packing (@ $5 per direct labor-hour) 308,000 118,000 Shipping (@ $1,320 per shipment) 137,280 274,560 Total ABC overhead $ 712,880 $ 1,832,560 Total ABC cost $ 3,964,880 $ 5,216,560 Number of units 104,000 42,000 Unit cost $ 38.12 $ 124.20 Required: 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

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility

		Cost Driver Volume
Activity	Cost Driver	Sport	Pro	Total
Assembly building
Assembling	Machine-hours	6,400	30,400	36,800
Setting up machines	Setup hours	44	440	484
Handling material	Production runs	12	44	56
Packaging building
Inspecting and packing	Direct labor-hours	61,600	23,600	85,200
Shipping	Number of shipments	104	208	312

Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility

		Sport		Pro
Direct material	$	1,504,000	$	2,408,000
Direct labor
Assembly	$	754,000	$	608,000
Packaging		994,000		368,000
Total direct labor	$	1,748,000	$	976,000
Direct costs	$	3,252,000	$	3,384,000
Overhead
Assembly building
Assembling (@ $30 per MH)	$	192,000	$	912,000
Setting up machine (@ $900 per setup hour)		39,600		396,000
Handling material (@ $3,000 per run)		36,000		132,000
Packaging building
Inspecting and packing (@ $5 per direct labor-hour)		308,000		118,000
Shipping (@ $1,320 per shipment)		137,280		274,560
Total ABC overhead	$	712,880	$	1,832,560
Total ABC cost	$	3,964,880	$	5,216,560
Number of units		104,000		42,000
Unit cost	$	38.12	$	124.20

Required:

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

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