Hercules Inc. manufactures elliptical exercise machines andtreadmills. The products are produced in its Fabrication andAssembly production departments. In addition toproduction activities, several other activities are required toproduce the two products. These activities and theirassociated activity rates are as follows:Activity RateActivityFabrication$32 per machine hour$14 per direct labor hourAssemblySetup$54 per setupInspecting$22 per inspectionProduction scheduling$15 per production orderPurchasing$12 per purchase orderThe activity-base usage quantities and units produced foreach product were as follows:TreadmillActivity BaseElliptical MachinesMachine hours1,7231,017Direct labor408159Setups4213Inspections614368Production orders7715Purchase orders171104Units produced315211Use the activity rate and usage information to determinethe total activity cost and activity cost per unit for eachproduct. If required, round the per unit answers to thenearest cent.Activity Cost Per UnitTotal Activity CostElliptical MachinesTreadmill

Activity based costing is a technique of assigning cost under which the activities involved in…

Answered: Hercules Inc. manufactures elliptical…

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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The Sit-N-Spin Corporation manufactures and assembles office chairs. Sit-N-Spin uses an activity-based costing system to allocate all manufacturing conversion costs. Each chair consists of 20 separate parts totaling $125 in direct materials, and requires 2.0 hours of machine time to produce. Additional information follows: Activity Allocation Base Cost Allocation Rate Materials handling Number of parts $2.75 per part Machining Machine hours $3.00 per machine hour Assembling Number of parts $1.50 per part Packaging Number of finished units $2.75 per finished unit What is the cost of assembling per chair?
Jefferson, Incorporated, produces two products (Product 5 and Product Z) using two activities: Machining, which uses machine hours as the cost driver, and Inspection, which uses the number of batches as the cost driver. The cost of Machining is $148,500, while the cost of Inspection is $41,180. The products have the following activity demands: Product 5 Product Z 1,485 3,015 52 19 Total 4,500 71 What proportion of the Machining activity is used by Product 5? Machine hours Number of batches Multiple Choice O 67% 59% 33% 41%
Product Costs using Activity Rates Hercules Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows: Activity Activity Rate Fabrication $30 per machine hour Assembly $35 per direct labor hour Setup $90 per setup Inspecting $20 per inspection Production scheduling $19 per production order Purchasing $5 per purchase order The activity-base usage quantities and units produced for each product were as follows: Activity Base Elliptical Machines Treadmill Machine hours 600 400 Direct labor hours 190 223 Setups 30 30 Inspections 15 25 Production orders 40 30 Purchase orders 318 85 Units produced 500 320 Use the activity rate and usage information to determine the total activity cost and activity cost per unit for each product. Total…
Maxey & Sons manufactures two types of storage cabinets-lype A and Type B-and applies manufacturing overhead to all units at the rate of $120 per machine hour. Production information follows. Descriptions Anticipated volume (units) Direct-material cost per unit Direct-labor cost per unit Descriptions The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activities' three respective cost drivers, follow. Setups Machine hours Outgoing shipments Type A 140 48,000 200 Required 1 Type A 24,000 $28 33 Required 2 Required 3 The firm's total overhead of $13,860,000 is subdivided as follows: manufacturing setups, $3,024,000; machine processing. $8,316,000; and product shipping, $2,520,000. Required: 1. Compute the unit manufacturing cost of Type A and Type B…
Rooney Manufacturing produces two keyboards, one for laptop computers and the other for desktop computers. The production process is automated, and the company has found activity-based costing useful in assigning overhead costs to its products. The company has identified five major activities involved in producing the keyboards. Activity Materials receiving & handling Production setup Assembly Quality inspection Packing and shipping Activity measures for the two kinds of keyboards follow: Laptops Desktops Required Labor Cost $ 1,190 1,080 Laptop keyboards Desktop keyboards Allocation Base Cost of material Number of setups Number of parts Inspection time Number of orders Material Number of Number of Cost $6,000 7,000 Cost Per Unit Setups 26 13 Parts 46 25 Allocation Rate 1% of material cost $ 109.00 per setup $ 5.00 per part $ 1.30 per minute $10.00 per order Inspection Time 7,200 minutes 5,100 minutes Number of Orders 61 a. Compute the cost per unit of laptop and desktop keyboards,…
Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing (purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Sourcing Operations Sourcing 10,000 The costs incurred in the plant are as follows: Departments Sourcing Operations Assembly Finishing Total a Direct Method Assembly Finishing Step Method Assembly Finishing c. Reciprocal Method Total Labor Hours Used by Departments Operations 20,000 b. Assembly Finishing Departmental Costs $ 210,000 280,000 440,000 285,000 1,215,000 Required: 1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method?…
Solomon Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow: Activities Unit Level Batch Level Product Level Facility Level Cost $ 78, 300 $ 28,910 $ 15,000 $ 180,000 Cost driver 2,700 labor hours 49 setups Percentage of use 18,000 units Production of 730 sets of cutting shears, one of the company's 20 products, took 180 labor hours and 5 setups and consumed 16 percent of the product - sustaining activities. Required Had the company used labor hours as a companywide allocation base, how much overhead would it have allocated to the cutting shears? How much overhead is allocated to the cutting shears using activity-based costing? Compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 730 units…
Klamath Corp. produces two products: saws and drills. Three activities are used in their manufacture. These activities and their associated costs and bases are as follows: Activity Stamping Assembly Setup Activity Base Machine hours Labor hours Number of setups Units produced Budgeted Costs Saws Drills $200,000 400,000 30,000 Saws 4,000 7,000 $ 3 500 Activity Base Machine hours Labor hours Number of setups a. Determine the activity rate for each activity. Stamping Assembly Setup Drills 6,000 13,000 12 600 per machine hour per labor hour per setup b. Determine the factory overhead to be allocated to each unit of product. Round your answers to two decimal places, if necessary. per unit per unit Total 10,000 20,000 15 Previous
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XYZ Co. manufactures three types of remote-control devices: X, Y, and Z. The company, which uses activity-based costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below. Activity Cost Cost Driver Material handling $225,000 Number of parts Material insertion 2,475,000 Number of parts Automated machinery 840,000 Machine hours Finishing 170,000 Direct labor hours Packaging 170,000 Orders shipped Total $3,880,000 The following information pertains to the three product lines for next year: Y Units to be produced 10,000 5,000 2,000 Orders to be shipped 1,000 500 200 Number of parts per unit 10 15 25 Machine hours per unit 3 Labor hours per unit 2 What is pool rate for the automated machinery activity? Oa. $50.00 per machine hour.
Greenwood Company manufactures two products-13,000 units of Product Y and 5,000 units of Product Z. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity- based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Y and Z: Activity Cost Pool Machining Machine setups Production design General factory Activity Measure Machining Windows DESKTOP- Windows Number of setups Number of products Direct labor-hours Total overhead cost Activity Measure Machine-hours Number of setups Number of products Direct labor-hours Product Y FEB +1 (252) 484-2153 Oh nun Product Y Product Z 8,800 3,200 240 40 1 1 8,800 3,200 11. Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y an Product Z? (F your intermediate calculations to 2 decimal places. Round your answers to 2…
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