Longyearbyen Co. incurs $1,050,000 of overhead costs each year in its three main departments, machining ($600,000), inspections ($300,000) and packing ($150,000). The machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year. In the past a traditional overhead allocation system was used using direct labor hours. They are considering switching to an activity based costs allocation of overhead. Information about Longyearbyen's two products is as follows: Machine Hours Inspections Orders Packed Direct Labor Hours Product Coal 1,000 MHs 100 Inspections 350 orders packed 1,700 DLHs Product Beer 3,000 MHs 500 Inspections 650 orders packed 1,800 DLHS Under an activity based costing allocation, Beer will be allocated $ more than under the old traditional system?

Longyearbyen Co. incurs $1,050,000 of overhead costs each year in its three main departments, machining ($600,000), inspections ($300,000) and packing ($150,000). The machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year. In the past a traditional overhead allocation system was used using direct labor hours. They are considering switching to an activity based costs allocation of overhead. Information about Longyearbyen's two products is as follows: Machine Hours Inspections Orders Packed Direct Labor Hours Product Coal 1,000 MHs 100 Inspections 350 orders packed 1,700 DLHs Product Beer 3,000 MHs 500 Inspections 650 orders packed 1,800 DLHS Under an activity based costing allocation, Beer will be allocated $ more than under the old traditional system?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Metal Works Corporation has a significant level of manufacturing overhead. After preparing their budget for the next year, management expects the following overhead costs (the cost driver for each overhead cost pool is also shown): Activity Total Cost Cost Driver Maintenance $20,000 Machine hours Materials receiving 48,000 Shipments received Machine setups 8,000 # of setups Inspection 19,200 # of inspections The expected activity for the year for various cost drivers is: Cost Drivers Expected Activity Direct Labor Hours 32,000 Machine-hours 10,000 Shipments Received 4,000 Setups 80 Quality inspections 6,400 The company is considering accepting a significant production contract. Estimates for the contract are as follows: Contract Estimate Direct materials $96,000 Direct labor ( 640 hours) $128,000 Number of material shipments received 200 Number of inspections 320 Number of setups 8 Number of machine-hours 1,200…
Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company’s mine to its two steel mills—the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $188,400 per year, consisting of $0.19 per ton variable cost and $138,400 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 56% of the Transport Services Department’s capacity and the Southern Plant requires 44%. During the year, the Transport Services Department actually hauled 129,000 tons of ore to the Northern Plant and 59,800 tons to the Southern Plant. The Transport Services Department incurred $371,000 in cost during the year, of which $52,500 was variable cost and $318,500 was fixed cost. Required: How much of the Transport Services Department’s variable costs should be charged to each plant? How much of the Transport Services Department’s fixed costs should…
Hannibal Steel Company's Transport Services Department provides trucks to haul ore from the company's mine to its two steel mills- the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $311,100 per year, consisting of $0.23 per ton variable cost and $261,100 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 61% of the Transport Services Department's capacity and the Southern Plant requires 39%. During the year, the Transport Services Department actually hauled 118,000 tons of ore to the Northern Plant and 55,600 tons to the Southern Plant. The Transport Services Department incurred $355,000 in cost during the year, of which $53,100 was variable and $301,900 was fixed. Required: 1. How much of the Transport Services Department's variable costs should be charged to each plant? 2. How much of the Transport Services Department's fixed costs should be charged to…
The total factory overhead for Bardot Marine Company is budgeted for the year at $600,000 divided into two departments: Fabrication, $420,000, and Assembly, $180,000. Bardot Marine manufactures two types of boats: speedboats and bass boats. The speedboats require 8 direct labor hours in Fabrication and 4 direct labor hours in Assembly. The bass boats require 4 direct labor hours in Fabrication and 8 direct labor hours in Assembly. Each product is budgeted for 250 units of production for the year. If required, round all per unit answers to the nearest cent. a. Determine the total number of budgeted direct labor hours for the year in each department. Fabrication _______direct labor hours Assembly _______direct labor hours b. Determine the departmental factory overhead rates for both departments. Fabrication Department rate $______per dlh Assembly Department rate $______per dlh c. Determine the factory overhead allocated per unit for each product using the department…
Kingston Corporation has one of its manufacturing plants operating on a singleshift five-day week. The plant is operating at its full capacity (48,000 units of output per week) without the use of overtime or extra shifts. Fixed costs for single-shift operation amount to $180,000 per week. The average variable cost is a constant $60 per unit, at all output rates, up to 48,000 units per week. The company has received an order to produce an extra 8,000 units per week beyond the current single-shift maximum capacity. Two options are being considered to fill the new order: • Option 1. Increase the plant’s output to 72,000 units a week by adding overtime, by adding Saturday operations, or both. No increase in fixed costs is entailed, but the variable cost is $72 per unit for any output in excess of 48,000 units per week, up to a 72,000-unit capacity. • Option 2. Operate a second shift. The maximum capacity of the second shift is 42,000 units per week. The variable cost of the second shift…
Active Frame, Inc., manufactures clear and tinted sport glasses. The manufacturing of clear glasses takes 45,000 direct labor hours and involves 1,700 parts and 115 inspections. The manufacturing of tinted glasses takes 115,000 direct labor hours and involves 1,400 parts and 450 inspections. The traditional method applies $560,000 of overhead on the basis of direct labor hours. What is the amount of overhead per direct labor hour applied to the clear glass products?
The receiving department employs one worker who spends 25% of his time on the receiving activity and 75% of his time on inspecting products. His salary is $40,000. The amount of cost assigned to the receiving activity is
At the start of the year, Vencor Company estimated manufacturing overhead to be $2,000,000. Eighty percent of the overhead is fixed and relates to depreciation of equipment. The remaining 20 percent is variable. The company estimated machine hours to be 100,000 and thus used a predetermined overhead rate of $20 per machine hour. During the year, the company devised a new way to sequence movements of material among the machines, which resulted in a savings of 30,000 machine hours. Estimate the amount of manufacturing overhead that the company would save related to the reduction in machine hours. Why is the savings less than $20 per machine hour?
A manufacturing company uses two identical large and four identical small machines. Each large machine occupies one quarter of the workshop and fully employs three workers ; each small machine occupies half the space of a large machine and fully employs two workers. The workers are paid by piece work. Each of the six machines is estimated to work 1,440 hours per year, while the effective working life is taken as 12,000 working hours for each large machine and 9,000 working hours for each small machine. Large machines cost $ 20,000 each, and small machines $ 4,000 each. Scrap values are $ 4,000 and 100 respectively. Repairs, maintenance and oil are estimated to cost for each large machine $ 4,000 and for each small machine $ 1,200 during its effective life. Power consumption costs 5 P. per unit and amounts for a large machine 20 units per hour and for a small machine 2 units per hour. The manager is paid $ 4,800 a year and workshop supervision occupies % of his time, which is divided…
Godo
Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 51,000 machine hours per year, which represents 25,500 units of output. Annual budgeted fixed factory overhead costs are $255,000 and the budgeted variable factory overhead cost rate is $2.30 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 18,800 units, which took 40,000 machine hours. Actual fixed factory overhead costs for the year amounted to $249,400 while the actual variable overhead cost per unit was $2.20. Based on the information provided above, prepare the appropriate journal entries to record: (a) actual factory overhead costs for the year, (b) the applied factory overhead costs for the year (both variable and fixed), and (c) the total flexible-budget variance and the production volume variance for the period. Assume that the…
Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel mills-the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $321,300 per year, consisting of $0.15 per ton variable cost and $271,300 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 69% of the Transport Services Department's capacity and the Southern Plant requires 31%. During the year, the Transport Services Department actually hauled 124,000 tons of ore to the Northern Plant and 58,600 tons to the Southern Plant. The Transport Services Department incurred $361,000 in cost during the year, of which $54,000 was variable cost and $307,000 was fixed cost. Required: 1. How much of the Transport Services Department's variable costs should be charged to each plant? 2. How much of the Transport Services Department's fixed costs…