Kevin's bakery uses activity-based costing. Kevin has several activities that he tracks: Dollars Activity Mixing $9,600 320 mixing hours. Baking $8,200 820 baked goods Packaging $5,100 425 orders What cost would Kevin estimate for 1 order of 4 baked goods if he estimates that it will take 6 mixing hours?

Kevin's bakery uses activity-based costing. Kevin has several activities that he tracks: Dollars Activity Mixing $9,600 320 mixing hours. Baking $8,200 820 baked goods Packaging $5,100 425 orders What cost would Kevin estimate for 1 order of 4 baked goods if he estimates that it will take 6 mixing hours?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 21E: Sweet Dreams Bakery was started five years ago by Della Fontera who was known for her breads, sweet...

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Sweet Dreams Bakery was started five years ago by Della Fontera who was known for her breads, sweet rolls, and personalized cakes. Della had kept her accounting system simple, believing that she had a good intuitive handle on costs. She had been using the following formula to describe her monthly overhead costs: Overhead cost = 7,800 + 7.50 (direct labor hours) For breads and sweet rolls that were available in the bakery case each day, she applied a standard pricing system. For special orders, however, Della needed her cost formula to help her come up with an estimated cost for the personalized cake or wedding cake. To that cost, she applied a markup percentage. Lately, however, the increase in the variety of orders and the elaborateness of the wedding cakes made her wonder if a more sophisticated view of costs would help her in planning, budgeting, and pricing. After some late-night discussions with her workers, Della determined that Sweet Dreams expansion into wedding cakes and gift baskets had made special orders a more complex operation. The various shapes of the wedding cake tiers had required Dellas investing in different- sized cake pans, as well as decorating tips for icing. The different icing patterns and elaborate designs took much more time for icing, as well. In addition, while a five-year-olds birthday cake just requires that the childs name and (possibly) the superheros name are spelled correctly, a wedding cake is a once-in-a-lifetime item that must achieve perfection. (Della hated to use the term bridezilla but.) Gift baskets required Della to stock baskets, cellophane, and bows. Then when an order came in, a worker had to stop baking to arrange the muffins and breads artfully in the basket, wrap it, and tie the bow. While it seemed simple enough, this took time and thought. Thus, the number of direct labor hours was still an important variable, but so were the number of wedding cakes and gift baskets. Della rummaged through her college textbooks and found information on regression. Then, with help from one of her computer savvy workers, she ran multiple regression tables for the past 24 months of data for Sweet Dreams for three independent variables: number of direct labor hours, the number of wedding cakes, and the number of gift baskets. The following printout was obtained: Required: 1. Write out the cost equation for Sweet Dreams monthly overhead cost. 2. Suppose that next month Sweet Dreams expects to have 550 direct labor hours, 35 wedding cakes, and 20 gift baskets. What is the expected overhead? (Round to the nearest dollar.) 3. What does R2 mean in this equation? Overall, what is your evaluation of the cost equation that was developed for the cost of overhead? Suppose that Sweet Dreams charges an extra 2.50 to prepare a gift basket. This charge is in addition to the price charged for the items (e.g., muffins) that the customer chooses to put into the basket. How might Della use the results of the regression equation to see whether or not the 2.50 charge is appropriate?
Activity-based costing: selling and administrative expenses Jungle Junior Company manufactures and sells outdoor play equipment. Jungle Junior uses activity-based costing to determine the cost of the sales order processing and the customer return activity. The sales order processing activity has an activity rate of 20 per sales order, and the customer return activity has an activity rate of 100 per return. Jungle Junior sold 2,500 swing sets, which consisted of 750 orders and 80 returns. Determine (A) the total and (B) the per-unit sales order processing and customer return activity cost for swing sets.
Salley is developing material and labor standards for her company. She finds that it costs $0.55 per pound of material per widget. Each widget requires 6 pounds of material per widget. Salley is also working with the operations manager to determine what the standard labor cost is for a widget. Upon observation, Salley notes that it takes 3 hours in the assembly department and 1 hour in the finishing department to complete one widget. All employees are paid $10.50 per hour. A. What is the standard materials cost per unit for a widget? 8. What is the standard labor cost per unit for a widget?
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Suppose the smartphone manufacturer Peony Electronics provides the following information for its costs last month (in millions): (Click the icon to view the costs.) Read the requirements. Requirements 1, 2 and 3. Classify each of these costs according to its place in the value chain. Within the production category, break the costs down further into three subcategories: Direct Materials, Direct Labor, and Manufacturing Overhead. Then calculate the total cost for each value chain category. (Enter amounts in millions. If an input field is not used in the table, leave the input field empty; do not enter a zero.) Cost Delivery expense Salaries of salespeople Chipset Exterior case for phone Assembly-line workers' wages Technical support hotline Depreciation on plant and equipment Rearrange production process 1-800 (toll-free) line for customer orders Scientists' salaries Total costs Cost R and D $ 14 Peony Electronics Value Chain Cost Classification Direct Design Materials LA 60 5 $…
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Using activity-based costing to make decisions Treat Dog Collars uses activity-based costing. Treat’s system has the following features: Each collar has three parts, direct materials cost is $5.00 per collar, and direct labor cost is $4.00 per collar. Suppose Animal Hut has asked for a bid on 30,000 dog collars. Treat will issue a total of 175 purchase orders if Animal Hut accepts Treat’s bid. Requirements Compute the total estimated cost Treat will incur to purchase the needed materials and then assemble and package 30,000 dog collars. Also compute the cost per collar. For bidding, Treat adds a 40% markup to total cost. What total price will the company bid for the entire Animal Hut order? Suppose that instead of an ABC system, Treat has a traditional product costing system that allocates indirect costs at the rate of $9.50 per direct labor hour. The dog collar order will require 9,000 direct labor hours. What total price will Treat bid using this system’s total cost? Use your…