Vaughn Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The followinginformation relates to its budgeted operations for the current year.RevenuesDirect materials costsDirect labor costs.Overhead costsOperating income (loss)RevenuesDirect materials costsDirect labor costs.Overhead costsOperating income (loss)Activity Cost PoolsScheduling and travelSetup timeSupervisionThe controller, Peggy Kingman, is concerned about the residential product line. She cannot understand why this line is not moreprofitable given that the installations of window coverings are less complex for residential customers. In addition, the residential clientbase resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers.As a result, she has decided to take a closer look at the overhead costs assigned to the two product lines to determine whether a moreaccurate product costing model can be developed. Here are the three activity cost pools and related information she developed:Scheduling and travel.Setup timeActivity Cost PoolsScheduling and travelSetup timeSupervisionDirect labor costVaughn Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The followinginformation relates to its budgeted operations for the current year.Scheduling and travelSetup timeSupervision.Scheduling and travelSetup time$35.000120,00087,500Setup timeEstimated Overhead$87,500112,500120,000SupervisionCommercial$35,000Commercial120,00087,500$Estimated Use of Cost Drivers per ProductResidential $Scheduling and travel $$Commercial$$342,500The controller, Peggy Kingman, is concerned about the residential product line. She cannot understand why this line is not more.profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential clientbase resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers.As a result, she has decided to take a closer look at the overhead costs assigned to the two product lines to determine whether a moreaccurate product costing model can be developed. Here are the three activity cost pools and related information she developed:Estimated OverheadCommercial242,500$100,000$$750500$342,500242,500$100,000$87,500112,500120,000500Estimated Use of Cost Drivers per ProductCommercial750$50,000280,000232,500Cost DriversHours of travelNumber of setupsCompute the activity-based overhead rates for each of the three cost pools. (Round answers to 2 decimal places, e.g. 0.38.)$50,000280,000232,500ResidentialCost DriversDirect labor costResidential500250Hours of travelNumber of setupsOverhead Rates$500,500Residential500$(62,000)Residential250562,500Overhead RatesCompute the activity-based overhead rates for each of the three cost pools. (Round answers to 2 decimal places, e.g. 0.38.)Operating income (loss)$500,500562,500$(62,000)per hourper setupper dollarCompute the operating income for each product line, using the activity-based overhead rates.per hourper setupper dollar

Activity-based costing helps in allocating the overhead cost among the products. Activity rates are…

Answered: Compute the activity-based overhead…

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Meester Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to three activity cost pools based on resource consumption. Data used in the first stage allocations follow: Overhead costs: Equipment expense Supervisory expense Distribution of Resource Consumption Across Activity Cost Pools: Equipment expense Supervisory expense $80, 400 $ 4, 100 Product MO Product H2 Total Activity Cost Pools Machining Order Filling 0.60 0.60 MHS (Machining) 1,300 9,540 10,840 Machining costs are assigned to products using machine-hours (MHS) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow: Activity: 0.20 0.10 Orders (Order Filling) 790 1,480 2,270 Other 0.20 0.30…
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White Company has two departments, Cutting and Finishing. The company uses job-order costing and computes a predetermined overhead rate in each department. The Cutting Department bases its rate on machine-hours, and the Finishing Department bases its rate on direct labor-hours. At the beginning of the year, the company made the following estimates: Direct labor-hours Machine-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Department Cutting 7,800 59,500 $360,000 $ 3.00 0 Finishing 83,000 3,800 $ 418,000 0 $3.75
Ramsey SARL uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs - Security expense and Building depreciation - are allocated to three activity cost pools - Shipping, Carving, and Other - based on resource consumption. Data to perform these allocations appear below: Overhead Costs: Security expense: $105,000 Building depreciation: $70,000 Distribution of Resource Consumption across Activity Cost Pools: Overhead Cost Activity Cost Pools Shipping Carving Other Security expense 0.30 0.42 0.28 Building depreciation 0.34 0.32 0.34 The second stage of allocation is done by assigning the Shipping costs to products on the basis of orders shipped while products are assigned Carving costs based on machine hours. Costs assigned to the Other activity pool are not further assigned to products. Activity information for Ramsey's only two products is below: orders shipped machine hours Product BA-15: 6,300 1,500…
Forner, Inc., manufactures and sells two products: Product Z1 and Product Z8. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity Estimated Expected Activity Activity Overhead Activity Cost Pools Labor-related Measures Cost Product Z1 Product Z8 Total DLHS $112,190 40,440 609,770 600 2,000 Machine setups Оrder size 2,600 1,200 6, 200 setups 500 700 MHs 3,000 3,200 $762,400 The activity rate for the Machine Setups activity cost pool under activity-based costing is closest to: Multiple Cholce $203.26 per setup $190.55 per setup $122.97 per setup 92 F AQI 61 nere to search DELL
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Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows: Home Work $ 40 17 $ 66 Direct materials cost per unit Direct labor cost per unit Sales price per unit Expected production per nonth 32 363 574 620 units 330 units Harbour has monthly overhead of $186,075, which is divided into the following cost pools: $ 91,300 53,975 40,800 Setup costs Quality control Maintenance Total $186,075 The company has also compiled the following information about the chosen cost drivers: Work Total Home 38 Number of setups Number of inspections Number of machine hours 1,600 72 110 330 305 635 1,800 3,400 Required: 1. Suppose Harbour uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.) Overhead Assigned Home Model: Work Model: Total Overhead Cost 2. Calculate…
Comparing ABC and Plantwide Overhead Cost Assignments Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs: Setting up equipment $782,000 Other overheard $4,352,000 Setting up equipment is based on setup hours, and other overhead is based on oven hours. Wellington produces two products, Fudge and Cookies. Information on each product is as follows: Fudge Cookies Units produced 8,000 445,000 Setup hours 13,600 3,400 Oven hours 3,400 23,800 Required: Round your answers to the nearest whole dollar, unless otherwise directed. 1. Calculate the activity rate for (a) setting up equipment and (b) other overhead. a. Setting up equipment $4 per setup hour b. Other overhead per oven hour 2. How much total overhead is assigned to Fudge using ABC? $4
Single Plantwide Factory Overhead Rate Scrumptious Snacks Inc. manufactures three types of snack foods: tortilla chips, potato chips, and pretzels. The company has budgeted the following costs for the upcoming period: Factory depreciation Indirect labor Factory electricity Indirect materials Selling expenses Tortilla chips Potato chips Pretzels Administrative expenses Total costs Factory overhead is allocated to the three products on the basis of processing hours. The products had the following production budget and processing hours per case: I Budgeted Volume (Cases) Total If required $20,857 51,690 5,894 3,300 2,400 5,700 11,400 12,243 29,019 16,323 $136,026 Processing Hours Per Case 0.10 0.15 0.12
Required:1. Using the traditional approach to assigning overhead costs to academic programs:a. Calculate the predetermined overhead rate.b. Assign the overhead costs to each academic program using the predetermined rate.c. Calculate the total cost per student (direct costs plus overhead) of operating each academic program.2. Using ABC, complete the following requirements:a. Complete the first-stage allocation of overhead costs to academic programs.b. Calculate the activity rates for each of the activity cost pools.c. Using the activity rates calculated in (b), complete the second-stage allocation of overhead to academic programs.3. Based on the results of (2), calculate the total cost per student (direct costs plus overhead) of operating each academic program.4. Draft a memo to Maple explaining the key reasons for differences in the total cost per student of operating each academic program that arise between traditional costing approach and ABC.
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