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He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 114,000 units of the Sport model and 47,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 21 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Cost Driver Machine-hours setup hours Production runs Activity Assembly building Assembling setting up machines Handling material Packaging building Inspecting and packing Shipping Direct material Direct labor Assembly Packaging Total direct labor Direct costs Overhead Assembly building Direct labor-hours Number of shipments Assembling (@$30 per MH) setting up machine (@ $900 per setup hour) Handling material (@ $3,000 per run) Packaging building Inspecting and packing (@ $5 per direct labor-hour) Shipping (@ $1,320 per shipment) Total ABC overhead Total ABC cost Number of units Unit cost Cost Driver Volume Pro Sport 7,400 54 22 Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,514,000 65,600 114 31,400 540 54 25,600 228 $ 764,000 1,004,000 $1,768,000 $3,282,000 $ 222,000 48,600 66,000 $ 328,000 150,480 $ 815,080 $4,097,080 Total 114,000 35.94 38,800 594 76 91,200 342 Pro $2,428,000 $ 628,000 388,000 $1,016,000 $3,444,000 $ 942,000 486,000 162,000 128,000 300,960 $2,018,960 $5,462,960 47,000 $ 116.23 Required: a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900.

He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 114,000 units of the Sport model and 47,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 21 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Cost Driver Machine-hours setup hours Production runs Activity Assembly building Assembling setting up machines Handling material Packaging building Inspecting and packing Shipping Direct material Direct labor Assembly Packaging Total direct labor Direct costs Overhead Assembly building Direct labor-hours Number of shipments Assembling (@$30 per MH) setting up machine (@ $900 per setup hour) Handling material (@ $3,000 per run) Packaging building Inspecting and packing (@ $5 per direct labor-hour) Shipping (@ $1,320 per shipment) Total ABC overhead Total ABC cost Number of units Unit cost Cost Driver Volume Pro Sport 7,400 54 22 Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,514,000 65,600 114 31,400 540 54 25,600 228 $ 764,000 1,004,000 $1,768,000 $3,282,000 $ 222,000 48,600 66,000 $ 328,000 150,480 $ 815,080 $4,097,080 Total 114,000 35.94 38,800 594 76 91,200 342 Pro $2,428,000 $ 628,000 388,000 $1,016,000 $3,444,000 $ 942,000 486,000 162,000 128,000 300,960 $2,018,960 $5,462,960 47,000 $ 116.23 Required: a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900.

FINANCIAL ACCOUNTING
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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After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 114,000 units of the Sport model and 47,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 21 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Cost Driver Machine-hours setup hours Production runs Activity Assembly building Assembling Setting up machines Handling material Packaging building Inspecting and packing shipping Direct material Direct labor Assembly Packaging Total direct labor Direct costs Overhead Assembly building Assembling (@$30 per MH) setting up machine (@ $900 per setup hour) Handling material (@ $3,eee per run) Packaging building Inspecting and packing (@ $5 per direct labor-hour) Direct labor-hours Number of shipments Shipping (@$1,320 per shipment) Total ABC overhead Total ABC cost Number of units Unit cost Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,514,000 Model Sport Pro Sport Total ABC Overhead Cost Driver Volume Pro 7,400 54 22 65,600 114 31,400 540 54 25,600 228 $ 764,000 1,004,000 $1,768,000 $3,282,000 $ 222,000 48,600 66,000 $ 328,000 150,480 $ 815, 080 $4,097, 080 Total 114,000 35.94 38,800 594 76 91,200 342 Pro $2,428,000 $ 628,000 388,000 $1,016,000 $3,444,000 $ 942,000 486,000 162,000 Required: a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900. 128,000 300,960 $2,018,960 $5,462,960 47,000 $ 116.23
Transcribed Image Text:After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 114,000 units of the Sport model and 47,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 21 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Cost Driver Machine-hours setup hours Production runs Activity Assembly building Assembling Setting up machines Handling material Packaging building Inspecting and packing shipping Direct material Direct labor Assembly Packaging Total direct labor Direct costs Overhead Assembly building Assembling (@$30 per MH) setting up machine (@ $900 per setup hour) Handling material (@ $3,eee per run) Packaging building Inspecting and packing (@ $5 per direct labor-hour) Direct labor-hours Number of shipments Shipping (@$1,320 per shipment) Total ABC overhead Total ABC cost Number of units Unit cost Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,514,000 Model Sport Pro Sport Total ABC Overhead Cost Driver Volume Pro 7,400 54 22 65,600 114 31,400 540 54 25,600 228 $ 764,000 1,004,000 $1,768,000 $3,282,000 $ 222,000 48,600 66,000 $ 328,000 150,480 $ 815, 080 $4,097, 080 Total 114,000 35.94 38,800 594 76 91,200 342 Pro $2,428,000 $ 628,000 388,000 $1,016,000 $3,444,000 $ 942,000 486,000 162,000 Required: a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900. 128,000 300,960 $2,018,960 $5,462,960 47,000 $ 116.23
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