Ice Cool produces two different models of air conditioners. The activities, costs, and cost drivers associated with the production processes follow. Process Activity Budgeted Cost Activity Cost Driver Budgeted Activity Usage Assembly Machining $ 311,800 Machine hours (MH) 7,400 Setups 22,000 Setups 120 $ 333,800 Finishing Inspecting $ 232,000 Inspections 740 Support Purchasing $ 132,000 Purchase orders 540 Additional production information concerning its two models follows. Units and Activities Model X Model Z Units produced 2,200 4,400 Machine hours 2,200 5,200 Setups 40 80 Inspections 480 260 Purchase orders 360 180 Per Unit Model X Model Z Selling price per unit $ 415 $ 395 Direct materials cost per unit 155 115 Direct labor cost per unit 120 135 1. Compute the activity rate for each activity using activity-based costing. 2. Using activity-based costing, compute the overhead cost per unit for each model. 3. Compute the total product cost per unit for each model. 4. For each model, compute the gross profit per unit (selling price per unit minus product cost per unit).
Ice Cool produces two different models of air conditioners. The activities, costs, and cost drivers associated with the production processes follow. Process Activity Budgeted Cost Activity Cost Driver Budgeted Activity Usage Assembly Machining $ 311,800 Machine hours (MH) 7,400 Setups 22,000 Setups 120 $ 333,800 Finishing Inspecting $ 232,000 Inspections 740 Support Purchasing $ 132,000 Purchase orders 540 Additional production information concerning its two models follows. Units and Activities Model X Model Z Units produced 2,200 4,400 Machine hours 2,200 5,200 Setups 40 80 Inspections 480 260 Purchase orders 360 180 Per Unit Model X Model Z Selling price per unit $ 415 $ 395 Direct materials cost per unit 155 115 Direct labor cost per unit 120 135 1. Compute the activity rate for each activity using activity-based costing. 2. Using activity-based costing, compute the overhead cost per unit for each model. 3. Compute the total product cost per unit for each model. 4. For each model, compute the gross profit per unit (selling price per unit minus product cost per unit).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 17-17 (Algo) Using activity-based costing to allocate overhead, compute product cost and gross profit LO P3
Ice Cool produces two different models of air conditioners. The activities, costs, and cost drivers associated with the production processes follow.
| Process | Activity | Budgeted Cost | Activity Cost Driver | Budgeted Activity Usage |
|---|---|---|---|---|
| Assembly | Machining | $ 311,800 | Machine hours (MH) | 7,400 |
| Setups | 22,000 | Setups | 120 | |
| $ 333,800 | ||||
| Finishing | Inspecting | $ 232,000 | Inspections | 740 |
| Support | Purchasing | $ 132,000 | Purchase orders | 540 |
Additional production information concerning its two models follows.
| Units and Activities | Model X | Model Z |
|---|---|---|
| Units produced | 2,200 | 4,400 |
| Machine hours | 2,200 | 5,200 |
| Setups | 40 | 80 |
| Inspections | 480 | 260 |
| Purchase orders | 360 | 180 |
| Per Unit | Model X | Model Z |
|---|---|---|
| Selling price per unit | $ 415 | $ 395 |
| Direct materials cost per unit | 155 | 115 |
| Direct labor cost per unit | 120 | 135 |
1. Compute the activity rate for each activity using activity-based costing.
2. Using activity-based costing, compute the overhead cost per unit for each model.
3. Compute the total product cost per unit for each model.
4. For each model, compute the gross profit per unit (selling price per unit minus product cost per unit).
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