E4-11 Health 'R Us, 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, Health 'R Us 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, Health 'R Us'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 Cost Drivers Overhead Rate Number of Cost Drivers Used per Activity

E4-11 Health 'R Us, 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, Health 'R Us 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, Health 'R Us'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 Cost Drivers Overhead Rate Number of Cost Drivers Used per Activity

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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XYZ Co. currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow. Product Pool No.1 (Driver: DLH) Pool No. 2 (Driver: SU) Pool No. 3 (Driver: PC) Zeta 1.200 55 2,250 Beta 2,800 45 750 Pool Cost $160,000 $280,000 $360,000 The overhead cost allocated to Beta by using activity-based costing procedures would be: O a. None of the given answers. O b. $472,000. Fi O c. $356.000. O d. $328.000. e. $444,000.
XYZ Co. currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow. Product Pool No.1 (Driver: Pool No. 2 (Driver: SU) Pool No. 3 (Driver: PC) DLH) Zeta 1,200 55 2,250 Beta 2,800 45 750 Pool Cost $160,000 $280,000 $360,000 The overhead cost allocated to Zeta by using activity-based costing procedures would be: O a. $356,000. O b. $472,000. O c. None of the given answers. O d. $328,00. O e. $444,00.
XYZ Co.currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components .(PC) as cost drivers. Data on the cost pools and respective driver volumes follow Pool No.1 (Driver: DLH) Pool No. 3 (Driver: PC) Pool No. 2 (Driver: SU) Product 2,250 55 1,200 Zeta 750 45 2,800 Beta $360,000 $280,000 $160,000 Pool Cost :The overhead cost allocated to Beta by using activity-based costing procedures would be $356,000 a O $328,000 .b O .None of the given answers .c O $444,000 .d O $472,000 .e O
Product Costing and Decision Analysis for a Service Company Pleasant Stay Medical Inc. wishes to determine its product costs. Pleasant Stay offers a variety of medical procedures (operations) that are considered its “products.” The overhead has been separated into three major activities. The annual estimated activity costs and activity bases follow: Activity Budgeted Activity Cost Activity Base Scheduling and admitting $432,000 Number of patients Housekeeping 4,212,000 Number of patient days Nursing 5,376,000 Weighted care unit Total costs $10,020,000 Total “patient days” are determined by multiplying the number of patients by the average length of stay in the hospital. A weighted care unit (wcu) is a measure of nursing effort used to care for patients. There were 192,000 weighted care units estimated for the year. In addition, Pleasant Stay estimated 6,000 patients and 27,000 patient days for the year. (The…
Urban Africa cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 14% of direct-labor cost. Monthly direct-labor cost for Nile Blush makeup is 27,500. In an attempt to more equitably distribute quality-control costs, management is considering activity-based costing. The monthly data shown in the following chart have been gathered for Nile Blush makeup. Activity Cost Pool Incoming material inspection In-process inspection Product certification Required: Calculate the monthly quality-control cost to be assigned to the Nile Blush product line under each of the following product- costing system. a. Traditional system ,which assigns overhead on the basis of direct-labor costs b. ABC Does the traditional product-costing system overcost or undercost the Nile Blush product line with respect to quality-control costs? By what amount? Quantity of Driver for Nile Blush 10 types 18,000 units 20 orders Cost Driver Pool Rates…
Coronado Inc. has conducted the following analysis related to its product lines, using a traditional costing system (volume-based) and an activity-based costing system. The traditional and the activity-based costing systems assign the same amount of direct materials and direct labor costs. Products Product 540X Product 137Y Product 249S (a) Sales Revenue $210,000 Product 137Y * Your answer is incorrect. Product 540X $ LA LA 166,000 LA 94,000 Product 249S $ Total Costs Traditional $59,000 For each product line, compute operating income using the traditional costing system. 49,000 17,000 160060 131040 ABC 53900 $49,940 34,960 40,100
COVID 19 Co currently uses traditional costing procedures, applying $800.000 of overhead to products YB and YA on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow Product Pool No.1 (Driver DLH) Pool No.2 (Driven SU) Pool No 3.(Drivern PO YB 1,200 45 2.250 YA 2,800 55 750 Pool Cost $160,000 $280,000 The overhead cost allocated to YA by using activity-based costing procedures would be Select one Oa None of the answers is correct. b. $444.000 C S156.000 d. $240.000.
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Metroid Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate: Customer Service Activity Activity Base Activity Rate Bid preparation Number of bid requests $420 per request Shipment Number of shipments $90 per shipment Support standard items Number of standard items ordered $30 per std. item Support nonstandard items Number of nonstandard items ordered $180 per nonstd. item Assume that the company had the following gross profit information for three representative customers: Customer 1 Customer 2 Customer 3 Revenues $130,000 $210,000 $180,000 Cost of goods sold (81,900) (113,400) (90,000) Gross profit $48,100 $96,600 $90,000 Gross profit…
Pharoah Co. has identified an activity cost pool to which it has allocated estimated overhead of $10212000. It has determined the expected use of cost drivers for that activity to be 851000 inspections. Widgets require 217000 inspections, Gadgets 167000 inspections, and Targets 467000 inspections. How much is the overhead assigned to each product? O Widgets $3404000, Gadgets $3404000, Targets $3404000 O Widgets $217000, Gadgets $167000, Targets $467000 O Widgets $3404000, Gadgets $1702000, Targets $5106000 O Widgets $2604000, Gadgets $2004000, Targets $5604000
XYZ Co.currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow. Product Pool No.1 (Driver: DLH) Pool No. 2 (Driver: SU) Pool No. 3 (Driver: PC) Fi Zeta 1,200 55 2,250 Beta 2,800 45 750 Pool Cost $160,000 $280,000 $360,000 The overhead cost allocated to Beta by using activity-based costing procedures would be: O a. $444,000. O b. $472,00. Oc. $328,000. O d. None of the given answers. O e. $356,000. NEXT PAGE OUS PAGE