How much overhead cost Arden Corporation uses the following activity rates from its activity-based costing system to assign overhead costs to products:ActivitiesSetting up batchesProcessing customer orders| Assembling productsActivity Rate$75.00 per batchData concerning Product A12X:$70.00 per customer order$10.00 per assembly hourProduct A12X60Number of customer orders 30DataNumber of batchesNumber of assembly hours 500How much overhead cost would be assigned to Product A12X using theactivity-based costing system?

Explanation of Activity-Based Costing (ABC):Activity-Based Costing is a costing method that assigns…

Answered: Arden Corporation uses the following…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 5PB: Wrappers Tape makes two products: Simple and Removable. It estimates it will produce 369,991 units...

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Potterii sells its products to large box stores and recently added a retail line of products to sell directly to consumers. These estimates are to be used in determining the overhead allocation rate for ABC: What would be the predetermined rate for each cost pool?
The following product costs are available for Stellis Company on the production of erasers: direct materials, $22,000; direct labor, $35,000; manufacturing overhead, $17,500; selling expenses, $17,600; and administrative expenses; $13,400. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 13,750 equivalent units are produced, what is the equivalent material cost per unit? If 17,500 equivalent units are produced, what is the equivalent conversion cost per unit?
Activity-based costing systems: A. use a single predetermined overhead rate based on machine hours instead of on direct labor B. frequently increase the overhead allocation to at least one product while decreasing the overhead allocation to at least one other product C. limit the number of cost pools D. always result in an increase of at least one products selling price
Using the data in P4-2 and Microsoft Excel: 1. Separate the variable and fixed elements. 2. Determine the cost to be charged to the product for the year. 3. Determine the cost to be charged to factory overhead for the year. 4. Determine the plotted data points using Chart Wizard. 5. Determine R2. 6. How do these solutions compare to the solutions in P4-2 and P4-3? 7. What does R2 tell you about this cost model?
Activity-based costing: selling and administrative expenses Jungle Junior Company manufactures and sells outdoor play equipment. Jungle Junior uses activity-based costing to determine the cost of the sales order processing and the customer return activity. The sales order processing activity has an activity rate of 20 per sales order, and the customer return activity has an activity rate of 100 per return. Jungle Junior sold 2,500 swing sets, which consisted of 750 orders and 80 returns. Determine (A) the total and (B) the per-unit sales order processing and customer return activity cost for swing sets.
Evans, Inc., has a unit-based costing system. Evanss Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity, each product uses about the same labor time and materials. The plant has used direct labor hours for years to assign overhead to products. To help design engineers understand the assumed cost relationships, the Cost Accounting Department developed the following cost equation. (The equation describes the relationship between total manufacturing costs and direct labor hours; the equation is supported by a coefficient of determination of 60 percent.) Y=5,000,000+30X,whereX=directlaborhours The variable rate of 30 is broken down as follows: Because of competitive pressures, product engineering was given the charge to redesign products to reduce the total cost of manufacturing. Using the above cost relationships, product engineering adopted the strategy of redesigning to reduce direct labor content. As each design was completed, an engineering change order was cut, triggering a series of events such as design approval, vendor selection, bill of materials update, redrawing of schematic, test runs, changes in setup procedures, development of new inspection procedures, and so on. After one year of design changes, the normal volume of direct labor was reduced from 250,000 hours to 200,000 hours, with the same number of products being produced. Although each product differs in its labor content, the redesign efforts reduced the labor content for all products. On average, the labor content per unit of product dropped from 1.25 hours per unit to one hour per unit. Fixed overhead, however, increased from 5,000,000 to 6,600,000 per year. Suppose that a consultant was hired to explain the increase in fixed overhead costs. The consultants study revealed that the 30 per hour rate captured the unit-level variable costs; however, the cost behavior of other activities was quite different. For example, setting up equipment is a step-fixed cost, where each step is 2,000 setup hours, costing 90,000. The study also revealed that the cost of receiving goods is a function of the number of different components. This activity has a variable cost of 2,000 per component type and a fixed cost that follows a step-cost pattern. The step is defined by 20 components with a cost of 50,000 per step. Assume also that the consultant indicated that the design adopted by the engineers increased the demand for setups from 20,000 setup hours to 40,000 setup hours and the number of different components from 100 to 250. The demand for other non-unit-level activities remained unchanged. The consultant also recommended that management take a look at a rejected design for its products. This rejected design increased direct labor content from 250,000 hours to 260,000 hours, decreased the demand for setups from 20,000 hours to 10,000 hours, and decreased the demand for purchasing from 100 component types to 75 component types, while the demand for all other activities remained unchanged. Required: 1. Using normal volume, compute the manufacturing cost per labor hour before the year of design changes. What is the cost per unit of an average product? 2. Using normal volume after the one year of design changes, compute the manufacturing cost per hour. What is the cost per unit of an average product? 3. Before considering the consultants study, what do you think is the most likely explanation for the failure of the design changes to reduce manufacturing costs? Now use the information from the consultants study to explain the increase in the average cost per unit of product. What changes would you suggest to improve Evanss efforts to reduce costs? 4. Explain why the consultant recommended a second look at a rejected design. Provide computational support. What does this tell you about the strategic importance of cost management?
The following product costs are available for Kellee Company on the production of eyeglass frames: direct materials, $32,125; direct labor, $23.50; manufacturing overhead, applied at 225% of direct labor cost; selling expenses, $22,225; and administrative expenses, $31,125. The direct labor hours worked for the month are 3,200 hours. A. What are the prime costs? B. What are the conversion costs? C. What is the total product cost? D. What is the total period cost? E. If 6.425 equivalent units are produced, what is the equivalent material cost per unit? F. What is the equivalent conversion cost per unit?
Electan Company produces two types of printers. The company uses ABC, and all activity drivers are duration drivers. Electan Company is considering using DBC and has gathered the following data to help with its decision. A. Activities with duration drivers: B. Activities with consumption ratios and costs: C. Products with cycle time and practical capacity: Required: 1. Using cycle time and practical capacity for each product, calculate the total time for all primary activities. Comment on the relationship to ABC. 2. Calculate the overhead rate that DBC uses to assign costs. Comment on the relationship to a unit-based plantwide overhead rate. 3. Use the overhead rate calculated in Requirement 2 to calculate (a) the overhead cost per unit for each product, and (b) the total overhead assigned to each product. How does this compare to the ABC assignments shown in Part B of the Information set? 4. What if the units actually produced were 10,000 for Printer A and 18,000 for Printer B. Using DBC, calculate the cost of unused capacity.
The following product Costs are available for Haworth Company on the production of chairs: direct materials, $15,500; direct labor, $22.000; manufacturing overhead, $16.500; selling expenses, $6,900; and administrative expenses, $15,200. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 7,750 equivalent units are produced, what is the equivalent material cost per unit? If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?
The total cost for monthly supervisory cost in a factory is 4,500 regardless of how many hours the supervisor works or the quantity of output achieved. This cost a. is strictly variable. b. is strictly fixed. c. is a mixed cost. d. is a step cost. e. cannot be determined from this information.
Ripley, Inc., costs products using a normal costing system. The following data are available for last year: Overhead is applied on the basis of direct labor hours. Required: 1. What was the predetermined overhead rate? 2. What was the applied overhead for last year? 3. Was overhead over- or underapplied, and by how much? 4. What was the total cost per unit produced (carry your answer to four significant digits)?
If a company bases its predetermined overhead rate on 100,000 machine hours, and It actually has 100,000 machine hours, would there be an under applied or over applied overhead?

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