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Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars) Rasie 20,000 Advanced 10,000 Tetal 30,000 Nunber of units produced and sold $ 5,000,000 $2,000,00 1,350, 00 650, 00 1,15e, 000 480, 000 1200, 000 Sales Cost of goods sold Gross nargin Selling and adninistrative expenses 700,00 720,00 (20, 000) S 170,000 $ 150,00 Net operating incone (loss) Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company's Molding Department would be allocated based on machine-hours and the overhead costs in its Assemble and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information:

Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars) Rasie 20,000 Advanced 10,000 Tetal 30,000 Nunber of units produced and sold $ 5,000,000 $2,000,00 1,350, 00 650, 00 1,15e, 000 480, 000 1200, 000 Sales Cost of goods sold Gross nargin Selling and adninistrative expenses 700,00 720,00 (20, 000) S 170,000 $ 150,00 Net operating incone (loss) Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company's Molding Department would be allocated based on machine-hours and the overhead costs in its Assemble and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information:

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars): Basic 20,000 Advanced 10,000 Total 30,000 Number of units produced and sold $ 5,000,000 3,658, 000 Sales Cost of goods sold Gross margin Selling and adninistrative expenses $3,e00, e00 2,300,000 700,000 720,000 $ (20,000) S 170,eee $2, e00, e00 1,350,000 650,000 1.350.000 480.000 1,200, e0e Net operating incone (loss) Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company's Molding Department would be allocated based on machine-hours and the overhead costs in its Assemble and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information: Assenble Moldine and Pack S 787,500 Total $ 562, 5ee $1,350, eee Manufacturing overhead costs Direct labor hours: Basie hoursad COste 10,000 5,000 20, 000 10,000 30, e00 15,000 Advanced Machine hours: Basic Advanced 12,000 10,000 12,000 10,000 Required: 1. Using the plantwide approach: a. Calculate the plantwide overhead rate. b. Calculate the amount of overhead that would be assigned to each product. 2. Using a departmental approach: a. Calculate the departmental overhead rates. b. Calculate the total amount of overhead that would be assigned to each product. c. Using your departmental overhead cost allocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). 3. Koontz's production manager has suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the company's total manufacturing overhead cost to five activity cost pools as follows: Manufacturing Overhead Activity Cost Pool Machining Assemble and pack Order processing Setups Other (unused capacity) Activity Measure Machine-hours in Molding $ 417,500 Direct labor-hours in Assemble and Pack 282.500 Number of customer orders 230, 000 Setup hours 340.000 se,000 $1,350,000 She also determined that the average order size for the Basic and Advanced models is 400 units and 50 units, respectively. The molding machines require a setup for each order. One setup hour is required for each customer order of the Basic model and three hours are required to setup for an order of the Advanced model. The company pays a sales commissions of 5% for the Basic model and 10% for the Advanced model. Its traceable fixed advertising costs include $150,000 for the Basic model and $200,000 for the Advanced model. The remainder of the company's selling and administrative costs are organization-sustaining in nature. Using the additional information provided by the production manager, calculate: a. An activity rate for each activity cost pool. b. The total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approach. c. The total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. 4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 6-8. (Hint: Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses. and common fixed expenses) 5. Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model. O Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate the plantwide overhead rate Plantwide overhead rate 30 O BUH DLH Reg 1A Reg 18 Reg 2A Reg 28 Req 20 Req 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate the amount of overhead that would be assigned to each product. Basic Advanced Amount of overhead 900,000 Os 450,000 O Reg 1A Reg 18 Req 2A Reg 28 Reg 20 Req 3A Req 38 Reg 30 Reg 4 Reg 5 Calculate the departmental overhead rates. (Round your answers to 2 decimal places.) Molding Assemble and Pack Department s 18.75 O DLH Molding Department Manutacturing overhead rate $ 35.80 O MH per Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Req 3A Reg 38 Reg 3C Reg 4 Reg S Calculate the total amount of overhead that would be assigned to each product. (Round your intermediate calculations to 2 decimal places.) Basic Advanced Molding Department $ 429,600 O S 358,000 O Assemble and Pack Department Total manufacturing overhead assigned 375.000 O 187,500 O $ 804,600 $ 45,500
Transcribed Image Text:Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company considers all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars): Basic 20,000 Advanced 10,000 Total 30,000 Number of units produced and sold $ 5,000,000 3,658, 000 Sales Cost of goods sold Gross margin Selling and adninistrative expenses $3,e00, e00 2,300,000 700,000 720,000 $ (20,000) S 170,eee $2, e00, e00 1,350,000 650,000 1.350.000 480.000 1,200, e0e Net operating incone (loss) Direct laborers are paid $20 per hour. Direct materials cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company's Molding Department would be allocated based on machine-hours and the overhead costs in its Assemble and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information: Assenble Moldine and Pack S 787,500 Total $ 562, 5ee $1,350, eee Manufacturing overhead costs Direct labor hours: Basie hoursad COste 10,000 5,000 20, 000 10,000 30, e00 15,000 Advanced Machine hours: Basic Advanced 12,000 10,000 12,000 10,000 Required: 1. Using the plantwide approach: a. Calculate the plantwide overhead rate. b. Calculate the amount of overhead that would be assigned to each product. 2. Using a departmental approach: a. Calculate the departmental overhead rates. b. Calculate the total amount of overhead that would be assigned to each product. c. Using your departmental overhead cost allocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). 3. Koontz's production manager has suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the company's total manufacturing overhead cost to five activity cost pools as follows: Manufacturing Overhead Activity Cost Pool Machining Assemble and pack Order processing Setups Other (unused capacity) Activity Measure Machine-hours in Molding $ 417,500 Direct labor-hours in Assemble and Pack 282.500 Number of customer orders 230, 000 Setup hours 340.000 se,000 $1,350,000 She also determined that the average order size for the Basic and Advanced models is 400 units and 50 units, respectively. The molding machines require a setup for each order. One setup hour is required for each customer order of the Basic model and three hours are required to setup for an order of the Advanced model. The company pays a sales commissions of 5% for the Basic model and 10% for the Advanced model. Its traceable fixed advertising costs include $150,000 for the Basic model and $200,000 for the Advanced model. The remainder of the company's selling and administrative costs are organization-sustaining in nature. Using the additional information provided by the production manager, calculate: a. An activity rate for each activity cost pool. b. The total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approach. c. The total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. 4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 6-8. (Hint: Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses. and common fixed expenses) 5. Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model. O Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate the plantwide overhead rate Plantwide overhead rate 30 O BUH DLH Reg 1A Reg 18 Reg 2A Reg 28 Req 20 Req 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate the amount of overhead that would be assigned to each product. Basic Advanced Amount of overhead 900,000 Os 450,000 O Reg 1A Reg 18 Req 2A Reg 28 Reg 20 Req 3A Req 38 Reg 30 Reg 4 Reg 5 Calculate the departmental overhead rates. (Round your answers to 2 decimal places.) Molding Assemble and Pack Department s 18.75 O DLH Molding Department Manutacturing overhead rate $ 35.80 O MH per Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Req 3A Reg 38 Reg 3C Reg 4 Reg S Calculate the total amount of overhead that would be assigned to each product. (Round your intermediate calculations to 2 decimal places.) Basic Advanced Molding Department $ 429,600 O S 358,000 O Assemble and Pack Department Total manufacturing overhead assigned 375.000 O 187,500 O $ 804,600 $ 45,500
Reg 1A Reg 18 Req 24 Reg 28 Req 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg s Using your departmental overhead cost alocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). (Round your intermediate calculations to 2 decimal places.) Basic Advanced Sales 3.000.000 Cost of goods sokd Gross margin 2,000,000 2.204.000 O1445.500 O 564.500 O 564,500 O 720.000 O 400.000 O S 75.400S 74.500 795,400 O Seling and administrative expenses Nat aperating income 74,500 O Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate an activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Activity Rate s 18.0n per Machining Assemble and pack lOrder processing 18.98 per 9.42 O DLH 920.00 per order Setups per S 523.08 O hour Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 3C Reg 4 Reg 5 Calculate the total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity- based approach. (Round your intermediate calculations to 2 decimal places.) Basic Advanced Machining Assemble and pack $ 227,760 OS 189,800 O 188,400 O 46,000 O 94,200 O 184,000 O Order processing Setups Total overhead cost assigned 26,154 O 313,848 O Is 488,314 Is 781,848 Reg 1A Reg 18 Req 2A Reg 28 Reg 20 Req 3A Reg 38 Req 30 Reg 4 Req 5 Calculate the total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based аpproach. Basic Advanced Total traceable selling and administrative cost $ 300,000 Os 400,000 O O Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1A Req 18 Req 2A Reg 28 Req 20 Req 3A Reg 38 Reg 30 Reg 4 Req 5 Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 6-8. (Hint: Organize all of the company's costs Into three categorles: varlable expenses, traceable fixed expenses, and common flxed expenses.) (Round your Intermediate calculations to 2 decimal places.) Show less A Koontz Company Income statement Total Basic Advanced Sales Os 3,000,000 8 $ 2,000,000 O S 5,000,000 Variable expenses: Direct materials 1,400,000 800,000 0 600,000 O 150,000 O 600,000 O 300,000 8 200,000 O Direct labor 900,000 350,000 O Selling and administrative Total variable expenses 1,550,000 0 1,450,000 8 1,100,000 2,650,000 Contribution margin 900,000 2,350,000 Traceable fixed expenses: 1,270,162 0 488,314 8 150,000 8 781,848 8 200,000 Selling and administrative 350,000 8 Total traceable fixed expenses Segment margin 638,314 O 729,838 Os 981,848 1,620,162 $ (81,848) $ 729,838 Common fixed expenses: Other 580,000 Total common fixed expenses 580,000 Net operating income 149,838
Transcribed Image Text:Reg 1A Reg 18 Req 24 Reg 28 Req 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg s Using your departmental overhead cost alocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). (Round your intermediate calculations to 2 decimal places.) Basic Advanced Sales 3.000.000 Cost of goods sokd Gross margin 2,000,000 2.204.000 O1445.500 O 564.500 O 564,500 O 720.000 O 400.000 O S 75.400S 74.500 795,400 O Seling and administrative expenses Nat aperating income 74,500 O Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 30 Reg 4 Reg 5 Calculate an activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Activity Rate s 18.0n per Machining Assemble and pack lOrder processing 18.98 per 9.42 O DLH 920.00 per order Setups per S 523.08 O hour Reg 1A Reg 18 Reg 2A Reg 28 Reg 20 Reg 3A Reg 38 Reg 3C Reg 4 Reg 5 Calculate the total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity- based approach. (Round your intermediate calculations to 2 decimal places.) Basic Advanced Machining Assemble and pack $ 227,760 OS 189,800 O 188,400 O 46,000 O 94,200 O 184,000 O Order processing Setups Total overhead cost assigned 26,154 O 313,848 O Is 488,314 Is 781,848 Reg 1A Reg 18 Req 2A Reg 28 Reg 20 Req 3A Reg 38 Req 30 Reg 4 Req 5 Calculate the total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based аpproach. Basic Advanced Total traceable selling and administrative cost $ 300,000 Os 400,000 O O Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1A Req 18 Req 2A Reg 28 Req 20 Req 3A Reg 38 Reg 30 Reg 4 Req 5 Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 6-8. (Hint: Organize all of the company's costs Into three categorles: varlable expenses, traceable fixed expenses, and common flxed expenses.) (Round your Intermediate calculations to 2 decimal places.) Show less A Koontz Company Income statement Total Basic Advanced Sales Os 3,000,000 8 $ 2,000,000 O S 5,000,000 Variable expenses: Direct materials 1,400,000 800,000 0 600,000 O 150,000 O 600,000 O 300,000 8 200,000 O Direct labor 900,000 350,000 O Selling and administrative Total variable expenses 1,550,000 0 1,450,000 8 1,100,000 2,650,000 Contribution margin 900,000 2,350,000 Traceable fixed expenses: 1,270,162 0 488,314 8 150,000 8 781,848 8 200,000 Selling and administrative 350,000 8 Total traceable fixed expenses Segment margin 638,314 O 729,838 Os 981,848 1,620,162 $ (81,848) $ 729,838 Common fixed expenses: Other 580,000 Total common fixed expenses 580,000 Net operating income 149,838
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