Handbrain Inc. is considering a change to activity-based product costing. The company produces two products single production department. The production department is estimated to require 4,000 direct labor hours. udgeted to be $592,800. ime records from indirect labor employees revealed that they spent 40% of their time setting up production upporting actual production. The following information about cell phones and tablet PCs was determined from the corporate records: Number Direct of Labor Units Setups Hours Cell phones 500 2,000 76,000 Tablet PCs 1,100 2,000 76,000 Total 1,600 4,000 152,000 f required, round your answers to the nearest cent.
Handbrain Inc. is considering a change to activity-based product costing. The company produces two products single production department. The production department is estimated to require 4,000 direct labor hours. udgeted to be $592,800. ime records from indirect labor employees revealed that they spent 40% of their time setting up production upporting actual production. The following information about cell phones and tablet PCs was determined from the corporate records: Number Direct of Labor Units Setups Hours Cell phones 500 2,000 76,000 Tablet PCs 1,100 2,000 76,000 Total 1,600 4,000 152,000 f required, round your answers to the nearest cent.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
Transcribed Image Text:ebOok
L Cenc
TequireuTounayour answe
a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system
using the direct labor hours as the allocation base.
Cell phones
per unit
Tablet PCs
per unit
b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activities-one for
setup and the other for production support.
Budgeted Activity Cost
Activity Rate
Setup
per setup
Production support
$4
per direct labor hour
c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing.
Cell phones
per unit
Tablet PCs
per unit
d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)?
The per-unit indirect labor costs in (a) are distorted because
is consumed by the products in a different ratio from the
direct labor. The
- costing method results in the product with the
number of setups receiving a
larger portion of the setup activity cost. The
Y allocates overhead only on the basis of direct labor hours. Since the direct
labor hours
equal for each product, the allocated indirect labor will also
- equal.
Transcribed Image Text:rn/takeAssignmenttakeASsiyi
еВook
Activity-Based Costing and Product Cost Distortion
Handbrain Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in
a single production department. The production department is estimated to require 4,000 direct labor hours. The total indirect labor is
budgeted to be $592,800.
Time records from indirect labor employees revealed that they spent 40% of their time setting up production runs and 60% of their time
supporting actual production.
The following information about cell phones and tablet PCs was determined from the corporate records:
Number
Direct
of
Labor
Units
Setups
Hours
Cell phones
500
2,000
76,000
< Tablet PCs
1,100
2,000
76,000
Total
1,600
4,000
152,000
If required, round your answers to the nearest cent.
a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system
using the direct labor hours as the allocation base.
Cell phones
per unit
Tablet PCs
per unit
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education