Compute the indirect manufacturing costs allocated to each product using activity based costing. Q QBIU SAY田。三 ▼Arial12f*AD3536 2. ABC Corp uses an Activity Based Costing system. The accountants at ABC have identified three majoractivities and their related cost drivers. ABC manufactures Hats, Coats and Mittens.3738Cost Driver39 Activity40 Materials ProcessingDirect Materials Cost41 Machine Main tenanceMaintenance Hours42 MeasurementWeighing of Goods4344Direct Costs for Each Product for this month are as follows:OtherCost DriverDirect Materials CostMaintenance Hours(in $)48 Weighing of Goods45HatsCoatsMittens5%24%11%4635%30%30%24%20%32%4735%28%26%49Indirect Costs for the month is as follows:5051$38,00052 Materials ProcessingMachine Maintenance54 MeasurementTotal$25,00053$23,000$86,000555657 Required:TestSheet

Activity based costing is a costing system in which indirect costs or overheads are allocated to…

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Business

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Compute the indirect manufacturing costs allocated to each product using activity based costing.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 5PB: Allocating selling and administrative expenses using activity-based costing Shrute Inc. manufactures...

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

Compute the indirect manufacturing costs allocated to each product using activity based costing.

Q Q
BIU SAY
田。
三 ▼
Arial
12
f*
A
D
35
36 2. ABC Corp uses an Activity Based Costing system. The accountants at ABC have identified three major
activities and their related cost drivers. ABC manufactures Hats, Coats and Mittens.
37
38
Cost Driver
39 Activity
40 Materials Processing
Direct Materials Cost
41 Machine Main tenance
Maintenance Hours
42 Measurement
Weighing of Goods
43
44
Direct Costs for Each Product for this month are as follows:
Other
Cost Driver
Direct Materials Cost
Maintenance Hours(in $)
48 Weighing of Goods
45
Hats
Coats
Mittens
5%
24%
11%
46
35%
30%
30%
24%
20%
32%
47
35%
28%
26%
49
Indirect Costs for the month is as follows:
50
51
$38,000
52 Materials Processing
Machine Maintenance
54 Measurement
Total
$25,000
53
$23,000
$86,000
55
56
57 Required:
Test
Sheet

Definition Definition Total cost of procuring or producing a product or the cost that an individual or business owner undertakes for the manufacturing of goods.

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Allocating selling and administrative expenses using activity-based costing Shrute Inc. manufactures office copiers, which are sold to retailers. The price and cost of goods sold for each copier are as follows: In addition, the company incurs selling and administrative expenses of 414,030. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related to its three major nonmanufacturing activities: customer service, sales order processing, and advertising support. The advertising support is in the form of advertisements that are placed by Shrute Inc. to support the retailers sale of Shrute copiers to consumers. The budgeted activity costs and activity bases associated with these activities are: Activity-base usage and unit volume information for the three customers is as follows: Instructions Determine the activity rates for each of the three nonmanufacturing activities. Determine the activity costs allocated to the three customers, using the activity rates in (1). Construct customer profitability reports for the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and operating income associated with each customer. Provide recommendations to management, based on the profitability reports in (3).
Vanvalkenburg. Inc., manufactures and sells two products: Product GQ5 and Product JO. 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 Measures Cost Product Q5 Product JØ Total Labor-related DLHS $191,748 70,536 295,592 Production orders 3,000 2,800 5,800 orders 300 500 800 Order size MHs 4,300 4,500 8,800 $557,876 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: Multiple Cholce $36.23 per MH $68.48 per MH $96.19 per MH
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