Hails Corporation manufactures two products: Product Q21F and Product H44W. The company uses a plantwide overhead rate based on direct labor- hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Q21F and H44W. Activity Cost Pool Machining Machine setups Product design Order size Machine-hours Number of setups Number of products Direct labor-hours 26.71% O 50.00% O 34.18% Activity Measure Machine-hours Number of setups Number of products Direct labor-hours Activity Measure 60.89% Total Cost Total Activity 195,000 13,000 MHs 90,000 150 setups $ $ $ 64,000 2 products $ 280,000 10,000 DLHs Product Q21F Using the ABC system, the percentage of the total overhead cost that is assigned to Product Q21F is closest to: 9,000 80 1 6,000 Product H44W 4,000 70 1 4,000

Hails Corporation manufactures two products: Product Q21F and Product H44W. The company uses a plantwide overhead rate based on direct labor- hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Q21F and H44W. Activity Cost Pool Machining Machine setups Product design Order size Machine-hours Number of setups Number of products Direct labor-hours 26.71% O 50.00% O 34.18% Activity Measure Machine-hours Number of setups Number of products Direct labor-hours Activity Measure 60.89% Total Cost Total Activity 195,000 13,000 MHs 90,000 150 setups $ $ $ 64,000 2 products $ 280,000 10,000 DLHs Product Q21F Using the ABC system, the percentage of the total overhead cost that is assigned to Product Q21F is closest to: 9,000 80 1 6,000 Product H44W 4,000 70 1 4,000

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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Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information: Activity Production setups Material handling Packaging costs Cost Driver Number of setups Number of parts Number of units Amount $ 73,000 42,000 153,750 $ 268,750 What is the total overhead allocated to Product M using the current system? M 12 72 75,000 XY 28 18 50,000
WoolCorp is currently using the single plantwide factory overhead rate method, which uses a predetermined overhead rate based on an estimated allocation base such as direct labor hours or machine hours. The rate is computed as follows: Single Plantwide Factory Overhead Rate = (Total Budgeted Factory Overhead) ÷ (Total Budgeted Plantwide Allocation Base) WoolCorp has been using combing machine hours as its allocation base. The company would like to consider activity-based costing. In order to understand their current system better, you evaluate WoolCorp’s current method of costing for raw wool and wool yarn. The production staff has compiled the following information for you on the production of 550 pounds of either raw wool or wool yarn: FactoryOverhead Type BudgetedFactoryOverhead Sorting $25,600 Cleaning 38,400 Combing 1,200 Raw Wool Wool Yarn Hours of combing machine use required 80 20 In the following table, use combing machine hours as the allocation…
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Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $24.82 per unit, while product B has been assigned $13.58 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: Cost Pools Activity Costs Cost Drivers Activity Driver Consumption Machine setup $ 158,000 Setup hours 2,000 Materials handling 112,000 Pounds of materials 16,000 Electric power 25,000 Kilowatt-hours 25,000 The following cost information pertains to the production of A and B, just two of Hakara's many products: A B Number of units produced 5,000 10,000 Direct materials cost $ 32,000 $ 41,000 Direct labor cost $ 41,000 $ 38,000 Number of setup hours 100 200 Pounds of materials used 1,000 1,000 Kilowatt-hours 2,000 4,000 Required: 1. Use…
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Central Perk, LLC, a manufacturer of coffee beans, is considering switching its operations to an Activity Based Costing system. The following manufacturing overhead activities and cost drivers have been identified: Activity. Machine setup Machine assembly Product inspection Product movement General factory Cost Driver Number of machine setups Machine hours logged Inspection hours logged Number of moves Machine hours logged Based on the above descriptions, which of the following correctly pairs the activity with its appropriate cost level? O A. Product Inspection... batch level cost OB. Product Movement... facility level cost O C. Machine Assembly... unit level cost O D. General Factory... batch level cost O E. Machine Setup... unit level cost
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