INSTRUCTIONS: 1) compute the predetermined overhead rate using traditional costing with machine hours as the basis. 2) Compute the manufacturing cost per window set under traditional costing 3) Compute the manufacturing cost per window set under the proposed activity-based costing. OVERHEAD COST POOLS Purchasing - $75,000 Handling Materials........ $82000 Production (cutting, milling, -- 100,000 Inspecting --220,000 Setting up machines-- - - - - 120,000 Inventory control (raw materials, and finished good). . . . . . $126,000 Utilities - 300,000 total budget overhead costs $1,173, 000 For the last couple years the company has been charging overhead to products on the basis of machine hours, for the above budget 100,000 machine hours are budgeted. Recently, the company was directed to implement activity-based costing system, the accountant and foreman identified the following cost drivers and their usage for the previously budgeted overhead cost pools Activity Cost Pools -- - Activity cost drivers------- Total drivers Purchasing-- number of orders-- - 600 Handling Materials-- finishing-- - direct labor hours--- - - - - 1,250 Inspecting 6000 Inventory control-- - Number of inspections-- - Square feet occupied-- - 90000 The company of components--------168000 Utilities----- received an order for 250 "Treatment X" from a customer, the accountant prepares the cost estimates for producing components for 250 "Treatment X" so the company may submit a contract price per Treatment X to Direct materials - $104, 200 Direct labor- - - - $112, 100 Machine hours -5,200 Number of purchase 800 Number of machine setups -450 Number of components Setting up machines-- orders-- 8000 Production- - - - - - - number of setups--- - 15,000 Direct labor hours- 60 Number of materials moved-- - number of moves - 100 Number of inspections- - - - 16000 Number of square feet occupied-- - 8,000 -- 100,000 - number
INSTRUCTIONS: 1) compute the predetermined overhead rate using traditional costing with machine hours as the basis. 2) Compute the manufacturing cost per window set under traditional costing 3) Compute the manufacturing cost per window set under the proposed activity-based costing. OVERHEAD COST POOLS Purchasing - $75,000 Handling Materials........ $82000 Production (cutting, milling, -- 100,000 Inspecting --220,000 Setting up machines-- - - - - 120,000 Inventory control (raw materials, and finished good). . . . . . $126,000 Utilities - 300,000 total budget overhead costs $1,173, 000 For the last couple years the company has been charging overhead to products on the basis of machine hours, for the above budget 100,000 machine hours are budgeted. Recently, the company was directed to implement activity-based costing system, the accountant and foreman identified the following cost drivers and their usage for the previously budgeted overhead cost pools Activity Cost Pools -- - Activity cost drivers------- Total drivers Purchasing-- number of orders-- - 600 Handling Materials-- finishing-- - direct labor hours--- - - - - 1,250 Inspecting 6000 Inventory control-- - Number of inspections-- - Square feet occupied-- - 90000 The company of components--------168000 Utilities----- received an order for 250 "Treatment X" from a customer, the accountant prepares the cost estimates for producing components for 250 "Treatment X" so the company may submit a contract price per Treatment X to Direct materials - $104, 200 Direct labor- - - - $112, 100 Machine hours -5,200 Number of purchase 800 Number of machine setups -450 Number of components Setting up machines-- orders-- 8000 Production- - - - - - - number of setups--- - 15,000 Direct labor hours- 60 Number of materials moved-- - number of moves - 100 Number of inspections- - - - 16000 Number of square feet occupied-- - 8,000 -- 100,000 - number
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:INSTRUCTIONS: 1) compute the predetermined overhead rate using traditional costing with machine hours as the basis.
2) Compute the manufacturing cost per window set under traditional costing 3) Compute the manufacturing cost per
window set under the proposed activity-based costing. OVERHEAD COST POOLS Purchasing
- $75,000 Handling Materials........
$82000 Production (cutting, milling,
-- 100,000 Inspecting
--220,000 Setting up machines-- - - - -
120,000 Inventory control (raw materials, and finished good). . . . . . $126,000 Utilities
- 300,000 total budget overhead costs $1,173, 000 For the last couple years the
company has been charging overhead to products on the basis of machine hours, for the above budget 100,000
machine hours are budgeted. Recently, the company was directed to implement activity-based costing system, the
accountant and foreman identified the following cost drivers and their usage for the previously budgeted overhead cost
pools Activity Cost Pools -- - Activity cost drivers------- Total drivers Purchasing--
number of orders--
- 600 Handling Materials--
finishing--
- direct labor hours---
- - - - 1,250 Inspecting
6000 Inventory control--
- Number of inspections--
- Square feet occupied-- - 90000 The company
of components--------168000 Utilities-----
received an order for 250 "Treatment X" from a customer, the accountant prepares the cost estimates for producing
components for 250 "Treatment X" so the company may submit a contract price per Treatment X to Direct materials
- $104, 200 Direct labor- - -
- $112, 100 Machine hours
-5,200 Number of purchase
800 Number of machine setups
-450 Number of components
Setting up machines--
orders--
8000 Production- - - -
- - - number of setups---
- 15,000 Direct labor hours-
60 Number of materials moved--
- number of moves
- 100 Number of inspections- - -
- 16000 Number of square feet occupied-- - 8,000
-- 100,000
- number
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