Chapter 5Activity-Based Costing.4.ORequired:nem tumbong srl sarhos bing1. Using Exhibit 5-6 as a guide, perform the first-stage allocation of costs to the activity cost pools.2. Using Exhibit 5-7 as a guide, compute the activity rates for the activity cost pools.ni3. Using the activity rates you have computed, determine the total cost and the average cost perthousand square feet of each of the following jobs according to the activity-based costing system.A routine 1,000-square-foot asbestos removal job.A routine 2,000-square-foot asbestos removal job.a.b.C. A nonroutine 2,000-square-foot asbestos removal job.12099Given the results you obtained in (3) above, do you agree with the estimator that the com-pany's present policy for bidding on jobs is adequate?itaib PROBLEM 5-18 Activity-Based Costing and Bidding on Jobs L05-2, L05-3, LO5-4 AMercer Asbestos Removal Company removes potentially toxic asbestos insulation and relatedproducts from buildings. There has been a long-simmering dispute between the company's estima-tor and the work supervisors. The on-site supervisors claim that the estimators do not adequatelydistinguish between routine work, such as removal of asbestos insulation around heating pipesin older homes, and nonroutine work, such as removing asbestos-contaminated ceiling plaster inindustrial buildings. The on-site supervisors believe that nonroutine work is far more expensivethan routine work and should bear higher customer charges. The estimator sums up his position inthis way: "My job is to measure the area to be cleared of asbestos. As directed by top management,I simply multiply the square footage by $2.50 to determine the bid price. Since our average costis only $2.175 per square foot, that leaves enough cushion to take care of the additional costs ofnonroutine work that shows up. Besides, it is difficult to know what is routine or not routine untilyou actually start tearing things apart."To shed light on this controversy, the company initiated an activity-based costing study of allof its costs. Data from the activity-based costing system follow:elliseyouqmos sill usiw systeai quegrado srit to theo lls modActivity Cost PoolRemoving asbestos.Estimating and job setupWorking on nonroutine jobsOther (organization-sustainingcosts and idle capacity costs)....haulNoneNote: The 100 nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routinejobs require estimating and setup.mbe 106 apCosts for the YearWages and salaries..Disposal feesEquipment depreciation.On-site supplies.dint Office expenses...amovaLicensing and insuranceTotal cost.Activity MeasureThousands of square feetNumber of jobsNumber of nonroutine jobsWages and salaries.Disposal fees.Equipment depreciation.On-site supplies.Office expenses.Licensing and insurance50%60%40%60%10%30%Distribution of Resource ConsumptionAcross Activities10%0%Total Activity800 thousand square feet500 jobs100 nonroutine jobsWorking onRemoving Estimating and NonroutineAsbestosJob SetupJobsthan 5%30%35%0%$ 300,000700,00090,00050,000200,000400,000$1,740,000HETool adi gin30%in 40%20%10%25%50%Other10%0%35%0%30%20%noshuda23161SeptTotal100%100%100%100%100%100%

Activity-based costing is a costing approach in which a company's activities are identified and the…

Chapter 5 Required: 1. 2. Using Exhibit 5-7 as a guide, compute the activity rates for the activity cost pools.ni Using Exhibit 5-6 as a guide, perform the first-stage allocation of costs to the activity cost pools. 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. A routine 1,000-square-foot asbestos removal job. A routine 2,000-square-foot asbestos removal job. A nonroutine 2,000-square-foot asbestos removal job. Given the results you obtained in (3) above, do you agree with the estimator that the com- pany's present policy for bidding on jobs is adequate? a. b. C. 4. MAJOR

Chapter 5 Required: 1. 2. Using Exhibit 5-7 as a guide, compute the activity rates for the activity cost pools.ni Using Exhibit 5-6 as a guide, perform the first-stage allocation of costs to the activity cost pools. 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. A routine 1,000-square-foot asbestos removal job. A routine 2,000-square-foot asbestos removal job. A nonroutine 2,000-square-foot asbestos removal job. Given the results you obtained in (3) above, do you agree with the estimator that the com- pany's present policy for bidding on jobs is adequate? a. b. C. 4. MAJOR

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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Assume a company manufactures only two products-14,000 units of Product G and 6,000 units of Product H. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to three cost pools. The following additional information is available for the company as a whole and for Products G and H: Activity Cost Pool Machining Machine setups Product design Activity Measure Machine-hours Number of setups Number of products Activity Measure Machine-hours Number of setups Number of products Product G Product H 9,000 50 1 6,000 150 1 Estimated Overhead Cost Expected Activity 15,000 MH 200 Setups $ 300,000 $ 150,000 $ 78,000 2 Products Using the ABC system, how much total overhead cost would be assigned from all of the activities to Product H?
The following figure depicts the complete system that Office Inc. uses to estimate the total cost of each office desk and office chair that it produces. How many cost pools does Office Inc.'s 2-stage costing system use for Office Chair objects? A. 7 B. 0 C. 6 D. 5 E. 4 F. 2 G. 1 H. 3 I. 8
3 2. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea, and it came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities follow: 5 ints 00:40:40 Activity Cost Pool and Activity Measure Purchase orders (number of orders) Rework requests (number of requests) Product testing (number of tests) Machine related (machine-hours) Activity Cost Pool Purchase orders Rework requests Product testing Machine related Estimated Overhead Cost $ 170,000 374,400 350,000 1,150,000 $2,044,400 Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools. Activity Rate per order per request per test per MH Deluxe 1,000 600 5,000 18,000 Activity Regular 1,500 1,200 12,500 28,000 Total 2,500 1,800 17,500 46,000 3. Assume that actual activity is as expected for the year. Using activity-based costing, do the following: a. Determine the…
1. Calculate the overhead rate based on the traditional overhead allocation method using direct labour hours as the base. 2. Calculate the total overhead applied to order no. 147 using the traditional overhead rate calculated in question 3.1 above. 3. Using activity based costing (ABC), calculate the overhead rate for the following activity: Purchasing. That is, what is the overhead rate per purchase order?
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1. Compute an activity rate for each activity using activity-based costing.
Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion The management of Nova Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Nova: $765,000 315,000 $1,080,000 Fabrication Department factory overhead Assembly Department factory overhead Total Direct labor hours were estimated as follows: Fabrication Department Assembly Department Total In addition, the direct labor hours (dlh) used to produce a unit of each product in each department were determined from engineering records, as follows: Production Departments…
Activity-Based Costing CardioTrainer Equipment Company manufactures stationary bicycles and treadmills. The products are produced in the Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows: Activity Activity Rate Fabrication $22 per machine hour (mh) Assembly $12 per direct labor hour (dlh) Setup $40 per setup Inspecting $18 per inspection Production scheduling $8 per production order Purchasing $5 per purchase order The activity-base usage quantities and units produced for each product were as follows: Stationary Bicycle Treadmill Machine hours 1,680 1,070 Direct labor hours 243 131 Setups 45 20 Inspections 158 94 Production orders 60 32 Purchase orders 240 98 Units produced 500 350
Solve the questions answer of number 3 & 4