Double Bounce Trampolines produces two models of trampolines for backyard fun. The"Original", and the recently introduced "Deluxe". The Deluxe model introduced several safetyfeatures that were intended to scare overly protective parents into upgrading. Since itsintroduction, the deluxe model has been increasing in sales, but at the same time, the company'sprofits have been declining. The CFO believes that the company's traditional costing systemmay be to blame. Currently, the company uses direct-labour hours as the basis for applyingoverhead. The company estimates that it will incur £600,000 in overhead costs in the nextyear.The following cost data is known:Direct MaterialsDirect Labour (£10 per hour)Number of Units ProducedAssembly (Labour Hours)Receiving (Receiving Reports)Testing (Number of Tests)Original£5020The CFO wishes to explore an activity-based costing systemActivity (Cost Driver)7,000 unitsRequired:a.) Under the traditional costing method:Estimated MOH£100,000200,000300,000£600,000i. Compute the predetermined overhead rate.ii. Determine the unit cost of each product.b.) Under activity-based costing:i. Compute the activity rates for each activity.ii. Determine the expected unit cost of each product.Total20,0004,0001,000Deluxe£75302,000 unitsExpected ActivityStandard14,0002,000200Deluxe6,0002,000800

Lets understand the basics. There are two type of costing methods are generally followed which are,…

Double Bounce Trampolines produces two models of trampolines for backyard fun. The "Original", and the recently introduced "Deluxe". The Deluxe model introduced several safety features that were intended to scare overly protective parents into upgrading. Since its introduction, the deluxe model has been increasing in sales, but at the same time, the company's profits have been declining. The CFO believes that the company's traditional costing system may be to blame. Currently, the company uses direct-labour hours as the basis for applying overhead. The company estimates that it will incur £600,000 in overhead costs in the next year.

Double Bounce Trampolines produces two models of trampolines for backyard fun. The "Original", and the recently introduced "Deluxe". The Deluxe model introduced several safety features that were intended to scare overly protective parents into upgrading. Since its introduction, the deluxe model has been increasing in sales, but at the same time, the company's profits have been declining. The CFO believes that the company's traditional costing system may be to blame. Currently, the company uses direct-labour hours as the basis for applying overhead. The company estimates that it will incur £600,000 in overhead costs in the next year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Double Bounce Trampolines produces two models of trampolines for backyard fun. The "Original", and the recently introduced "Deluxe". The Deluxe model introduced several safety features that were intended to scare overly protective parents into upgrading. Since its introduction, the deluxe model has been increasing in sales, but at the same time, the company's profits have been declining. The CFO believes that the company's traditional costing system may be to blame. Currently, the company uses direct-labour hours as the basis for applying overhead. The company estimates that it will incur £600,000 in overhead costs in the next year. The following cost data is known: Direct Materials Direct Labour (£10 per hour) Number of Units Produced Assembly (Labour Hours) Receiving (Receiving Reports) Testing (Number of Tests) Original £50 20 The CFO wishes to explore an activity-based costing system Activity (Cost Driver) 7,000 units Required: a.) Under the traditional costing method: Estimated…
Asbury Coffee Enterprises (ACE) manufactures two models of coffee grinders: Personal and Commercial. The Personal grinders have a smaller capacity and are less durable than the Commercial grinders. ACE only recently began producing the Commercial model. Since the Introduction of the new product, profits have been steadily declining, although sales have been increasing. The management at ACE belleves that the problem might be in how the accounting system allocates costs to products. The current system at ACE allocates manufacturing overhead to products based on direct labor costs. For the most recent year, which Is representative, manufacturing overhead totaled $2,091,000 based on production of 30,000 Personal grinders and 10,000 Commercial grinders. Direct costs were as follows: Direct materials Direct labor Personal $ 1,448,200 1,034,000 Commercial $ 661,000 708,500 Total $ 2,109,200 1,742,500 Management has determined that overhead costs are caused by three cost drivers. These…
Asbury Coffee Enterprises (ACE) manufactures two models of coffee grinders: Personal and Commercial. The Personal grinders have a smaller capacity and are less durable than the Commercial grinders. ACE only recently began producing the Commercial model. Since the introduction of the new product, profits have been steadily declining, although sales have been increasing. The management at ACE believes that the problem might be in how the accounting system allocates costs to products. The current system at ACE allocates manufacturing overhead to products based on direct labor costs. For the most recent year, which is representative, manufacturing overhead totaled $2,037,000 based on production of 30,000 Personal grinders and 10,000 Commercial grinders. Direct costs were as follows: Personal Commercial Total Direct materials $ 1,445,000 $ 620,000 $ 2,065,000 Direct labor 1,030,000 667,500 1,697,500 Management has determined that overhead costs are caused by three cost…
Asbury Coffee Enterprises (ACE) manufactures two models of coffee grinders: Personal and Commercial. The Personal grinders have a smaller capacity and are less durable than the Commercial grinders. ACE only recently began producing the Commercial model. Since the introduction of the new product, profits have been steadily declining, although sales have been increasing. The management at ACE believes that the problem might be in how the accounting system allocates costs to products. The current system at ACE allocates manufacturing overhead to products based on direct labor costs. For the most recent year, which is representative, manufacturing overhead totaled $2,023,500 based on production of 30,000 Personal grinders and 10,000 Commercial grinders. Direct costs were as follows: Personal Commercial Total Direct materials $ 1,444,200 $ 609,750 $ 2,053,950 Direct labor 1,029,000 657,250 1,686,250 Management has determined that overhead costs are caused by three cost…
Asbury Coffee Enterprises (ACE) manufactures two models of coffee grinders: Personal and Commercial. The Personal grinders have a smaller capacity and are less durable than the Commercial grinders. ACE only recently began producing the Commercial model. Since the introduction of the new product, profits have been steadily declining, although sales have been increasing. The management at ACE believes that the problem might be in how the accounting system allocates costs to products. The current system at ACE allocates manufacturing overhead to products based on direct labor costs. For the most recent year, which is representative, manufacturing overhead totaled $1,902,000 based on production of 30,000 Personal grinders and 10,000 Commercial grinders. Direct costs were as follows: Direct materials Direct labor Personal $ 1,437,000 1,020,000 Commercial $ 517,500 565,000 Total $ 1,954,500 1,585,000 Management has determined that overhead costs are caused by three cost drivers. These…
Asbury Coffee Enterprises (ACE) manufactures two models of coffee grinders. Personal and Commercial. The Personal grinders have a smaller capacity and are less durable than the Commercial grinders. ACE only recently began producing the Commercial model. Since the introduction of the new product, profits have been steadily declining, although sales have been increasing. The management at ACE believes that the problem might be in how the accounting system allocates costs to products. The current system at ACE allocates manufacturing overhead to products based on direct labor costs. For the most recent year, which is representative, manufacturing overhead totaled $1,929,000 based on production of 30,000 Personal grinders and 10,000 Commercial grinders. Direct costs were as follows: Direct materials Direct labor Cost Driver Number of production runs Quality tests performed Shipping orders processed Total overhead Management has determined that overhead costs are caused by three cost…
Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,262,000 based on production of 320,000 handheld consoles and 114,000 home consoles. Direct labor and direct materials costs were as follows. Handheld Home Total Direct labor $1,192,500 $385,000 $1,577,500 Materials 780,000 711,000 1,491,000 Management has determined that…
Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data form last year. Manufacturing overhead was $1,432,000 based on production of 290,000 handheld consoles and 108,000 home consoles. Direct labor and direct materials costs were as follows. Handheld Home Total Direct labor…
Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,320,000 based on production of 300,000 handheld consoles and 105,000 home consoles. Direct labor and direct materials costs were as follows. Handheld Home Total Direct labor $ 1,250,000 $ 400,000 $ 1,650,000 Materials $ 720,000 $ 657,000 $…
Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,334,000 based on production of 320,000 handheld consoles and 113,000 home consoles. Direct labor and direct materials costs were as follows. Handheld Home Total Direct labor $ 1,285,500 $ 382,000 $ 1,667,500 Materials 800,000…
Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to Investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1.337,000 based on production of 310,.000 handheld consoles and 95,000 home consoles. Direct labor and direct materials costs were as follows. Handheld Home $409,000 696,000 Total $1,671,250 1,476,000 Direct labor $1,262,250 780,000 Materials Management has determined that overhead costs are…
Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,125,000 based on production of 310,000 handheld consoles and 110,000 home consoles. Direct labor and direct materials costs were as follows. Handheld Home Total Direct labor $ 1,022,250 $ 384,000 $ 1,406,250 Materials 700,000 712,000 1,412,000…