Carla Vista, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Carla Vista engages in a high level of quality control. Health 'R Us assigns its quality-control overhead costs to all products at a rate of 17% of direct labor costs. Its direct labor cost for the month of June for its low-calorie breakfast line is $70,000. In response to repeated requests from its financial vice president, Carla Vista's management agrees to adopt activity-based costing. Data relating to the low- calorie breakfast line for the month of June are as follows. Activity Cost Pools Inspections of material received In-process inspections FDA certification 2. using activity-based costing. Cost Drivers Number of pounds Number of servings Customer orders Quality control overhead cost assigned $ Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June 1. using the traditional product costing system (direct labor cost is the cost driver). Quality control overhead cost assigned $ (c) Overhead Rate $0.60 per pound $0.32 per serving $12.00 per order By what amount does the traditional product costing system undercost or overcost the low-calorie breakfast line relative to costing under ABC? 2072 Inspections of material received In-process inspections FDA certification The traditional costing system undercosts the quality-control overhead cost assigned to the low-calorie dessert product line by $ eTextbook and Media 11900 Classify each of the activities as value-added or non-value-added. 13972 Value added Non-value-added Number of Cost Drivers Used per Activity 7,700 pounds 10,100 servings 510 orders Attempts: 1 of 3 used
Carla Vista, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Carla Vista engages in a high level of quality control. Health 'R Us assigns its quality-control overhead costs to all products at a rate of 17% of direct labor costs. Its direct labor cost for the month of June for its low-calorie breakfast line is $70,000. In response to repeated requests from its financial vice president, Carla Vista's management agrees to adopt activity-based costing. Data relating to the low- calorie breakfast line for the month of June are as follows. Activity Cost Pools Inspections of material received In-process inspections FDA certification 2. using activity-based costing. Cost Drivers Number of pounds Number of servings Customer orders Quality control overhead cost assigned $ Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June 1. using the traditional product costing system (direct labor cost is the cost driver). Quality control overhead cost assigned $ (c) Overhead Rate $0.60 per pound $0.32 per serving $12.00 per order By what amount does the traditional product costing system undercost or overcost the low-calorie breakfast line relative to costing under ABC? 2072 Inspections of material received In-process inspections FDA certification The traditional costing system undercosts the quality-control overhead cost assigned to the low-calorie dessert product line by $ eTextbook and Media 11900 Classify each of the activities as value-added or non-value-added. 13972 Value added Non-value-added Number of Cost Drivers Used per Activity 7,700 pounds 10,100 servings 510 orders Attempts: 1 of 3 used
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
Transcribed Image Text:Carla Vista, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products.
To meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Carla Vista
engages in a high level of quality control. Health 'R Us assigns its quality-control overhead costs to all products at a rate of 17% of
direct labor costs. Its direct labor cost for the month of June for its low-calorie breakfast line is $70,000. In response to repeated
requests from its financial vice president, Carla Vista's management agrees to adopt activity-based costing. Data relating to the low-
calorie breakfast line for the month of June are as follows.
Activity Cost Pools
Inspections of material received
In-process inspections
FDA certification
2. using activity-based costing.
Cost Drivers
Number of pounds
Number of servings
Customer orders
Quality control overhead cost assigned $
Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June
1. using the traditional product costing system (direct labor cost is the cost driver),
Quality control overhead cost assigned $
(c)
eTextbook and Media
By what amount does the traditional product costing system undercost or overcost the low-calorie breakfast line relative to
costing under ABC?
Overhead
Rate
$0.60 per pound
$0.32 per serving
$12.00 per order
The traditional costing system undercosts the quality-control overhead cost assigned to the low-calorie dessert product
line by $
2072
Inspections of material received
In-process inspections
FDA certification
11900
Classify each of the activities as value-added or non-value-added.
13972
Number of Cost
Drivers Used
per Activity
7,700 pounds
10,100 servings
510 orders
Value added
Non-value-added
Attempts: 1 of 3 used
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