REQUIRED From the following information, calculate the unit costs for “Spirit” and “Companion” using both the traditional method of costing (i.e. manufacturing overhead rate is based on units produced), and Activity based Costing. North-South Pole Company produces two products, a jacket suitable for adventure-seeking people(Spirit) and a jacket for less-adventurous people (Companion).Production and Sales per year20,000 units (Spirit) & 5,000 units (Companion)3.5 hours per unit (both)$32.00 per hour$285,000$180 per unit (both)Direct labourDirect labour costEstimated annual manufacturing overheadDirect materialsBreakdown of overhead ratesActivity BasedOverhead RatesActivity Cost PoolsEstimatedExpected Use of Cost DriversOverheadper ActivityMachine set-upSewingInspection$ 40,000$135,000 37,500 machine hours (MH)$ 25,000$? per set-up$? per MH$? per inspection2001000The breakdown between the two products for assigning overheads are as follows:ProductNo. of Set-upsInspectionsSpiritCompanionSewing23,50014,00010550095500

Manufacturing overhead means the expense incurred in factory which is not directly linked with…

North-South Pole Company produces two products, a jacket suitable for adventure-seeking people (Spirit) and a jacket for less-adventurous people (Companion). Production and Sales per year Direct labour 20,000 units (Spirit) & 5,000 units (Companion) 3.5 hours per unit (both) $32.00 per hour $285,000 $180 per unit (both) Direct labour cost Estimated annual manufacturing overhead Direct materials Breakdown of overhead rates Activity Based Overhead Rates Estimated Expected Use of Cost Drivers per Activity Activity Cost Pools Overhead Machine set-up Sewing Inspection $ 40,000 $135,000 $ 25,000 $? per set-up 37,500 machine hours (MH) $? per MH $? per inspection 200 1000 The breakdown between the two products for assigning overheads are as follows: Product No. of Set-ups Sewing 23,500 Inspections 500 Spirit Companion 105 95 14,000 500

North-South Pole Company produces two products, a jacket suitable for adventure-seeking people (Spirit) and a jacket for less-adventurous people (Companion). Production and Sales per year Direct labour 20,000 units (Spirit) & 5,000 units (Companion) 3.5 hours per unit (both) $32.00 per hour $285,000 $180 per unit (both) Direct labour cost Estimated annual manufacturing overhead Direct materials Breakdown of overhead rates Activity Based Overhead Rates Estimated Expected Use of Cost Drivers per Activity Activity Cost Pools Overhead Machine set-up Sewing Inspection $ 40,000 $135,000 $ 25,000 $? per set-up 37,500 machine hours (MH) $? per MH $? per inspection 200 1000 The breakdown between the two products for assigning overheads are as follows: Product No. of Set-ups Sewing 23,500 Inspections 500 Spirit Companion 105 95 14,000 500

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: The cost of a manufactured product generally comprises: a) direct materials cost b) direct labour…

A: In this question, we need to identify which of the given costs will be considered for calculating…

Q: All of the following are likely to be used as a cost allocation base in activity-based costing…

A: Activity-based costing( ABC) is a going system used in directorial accounting that assigns costs…

Q: Which of the following is not a product cost? Multiple Cholce O Direct materlals ) Direct labor…

A: Product cost is that which is not included in the direct manufacturing of the goods. Direct…

Q: Activity-based costing (ABC) involves steps, such as: Group of answer choices estimating annual…

A: The Activity-Based Costing (ABC) method is a management technique of assigning factory overheads…

Q: Which of the following is a cost pool used with the activity-based costing method? a. total factory…

A: The ABC cost system or activity based system is used to allocate the overhead costs on the basis of…

Q: Under absorption costing, which of the following costs would be included in finished goods…

A: The objective of the question is to identify which costs are included in finished goods inventory…

Q: Which costing method is used when the products are indistinguishable from each other? A. Job order…

A: The question is asking us to identify the costing method that is used when the products being…

Q: Which of the following statements is true? Multiple Cholce Varlable costing treats direct materials…

A: The period costs are the costs which are expensed in the period they are incurred. Example selling…

Q: When using process costing, a separate work in process account is kept for each: Multiple Choice…

A: Answer In processing costing each the Raw material is transferred to the various process until…

Q: costing is seen as part of the total life-cycle costing approach, in that cost savings are sought at…

A: “Since you have posted multiple questions, we will provide the solution only to the first question…

Q: 4. By reference to the above data, explain the concept of equivalent units in process costing.

A: In process costing, some units may have fully finished but other units may still be under…

Q: lative to traditional product costing, activity-based costing differs in the way costs are Group of…

A: There are different methods of costing in the accounting some are simple but others are not so…

Q: 3. Standard costing can be used to apply costs for which of the following? A) Direct Materials B)…

A: Standard costing is a system that uses predetermined costs for materials, labor, and overhead…

Q: In your own words, explain the difference between absorption costing and variable costing methods.…

A: Absorption costing: Its also called as Full costing.

Q: Compute predeterminedoverhead rates and explainwhy estimated overhead costs(r ather than actual…

A: Cost: It is the economic value incurred by the business to manufacture a product or to render a…

Q: is not a step in activity-based costing? Group of answer choices identify the activities performed…

A: In activity based costing, the overhead cost is allocated on the basis of the level of activites…

Q: Which of the following is a method used to allocate overhead costs based on the activities that…

A: A) Job costingJob costing involves the accumulation of the costs of materials, labor, and overhead…

Q: Job order costing and process costing both: a. All the given answers are correct. b. both allocate…

A: Job cost accounting accumulates prices by individual jobs. Method cost accounting accumulates prices…

Q: Which of the following are steps in process costing? Question 5 options: A) Visualize the…

A: Process costing is the method which is used by the entities to determine and allocate the costs of…

Q: Indicate whether the following statement is true or false, then support your view. By using a…

A: Traditional method of costing is the method of allocating overheads based on the single cost driver.…

Q: Which of the following product costing systems is normally used to assign costs to goods that are…

A: Solution: "Process costing" systems is normally used to assign costs to goods that are produced in…

Q: What term refers to a grouping of costs that consists of direct labor and factory overhead costs and…

A: Conversion cost is the total of labour cost and factory overhead cost/manufacturing Overhead cost.…

Q: What is a key difference between variable costing and absorption costing? a. The usage of…

A: Variable costing is a management and cost accounting concept in which fixed manufacturing overhead…

Q: In Traditional product costing systems, the measure of product activity is usually some volume based…

A: Lets understand the basics. There are two costing system are followed which are, (1) Traditional…

Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

REQUIRED

From the following information, calculate the unit costs for “Spirit” and “Companion” using both the traditional method of costing (i.e. manufacturing overhead rate is based on units produced), and Activity based Costing.

North-South Pole Company produces two products, a jacket suitable for adventure-seeking people
(Spirit) and a jacket for less-adventurous people (Companion).
Production and Sales per year
20,000 units (Spirit) & 5,000 units (Companion)
3.5 hours per unit (both)
$32.00 per hour
$285,000
$180 per unit (both)
Direct labour
Direct labour cost
Estimated annual manufacturing overhead
Direct materials
Breakdown of overhead rates
Activity Based
Overhead Rates
Activity Cost Pools
Estimated
Expected Use of Cost Drivers
Overhead
per Activity
Machine set-up
Sewing
Inspection
$ 40,000
$135,000 37,500 machine hours (MH)
$ 25,000
$? per set-up
$? per MH
$? per inspection
200
1000
The breakdown between the two products for assigning overheads are as follows:
Product
No. of Set-ups
Inspections
Spirit
Companion
Sewing
23,500
14,000
105
500
95
500

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Which best describes the flow of overhead costs in an activity-based costing system? Group of answer choices Overhead costs –> direct labor cost or hours –> products Overhead costs –> products Overhead costs –> activity cost pools –> cost drivers –> products Overhead costs –> machine hours –> products
Please define THREE of the following terms and provide an example of each one you have selected: • Conversion Costs• Direct Costs• Direct Labor Cost• Direct Materials Cost• Factory Overhead Cost• Indirect Costs• Period Costs• Prime Costs• Product Costs
Please explain the statement below thoroughly with examples. (Ture or False) "In activity-based costing, the manufacturing overhead cost per unit will depend partially on the number of units in a batch."
A direct material standard cost is: Group of answer choices The cost of direct materials that should be incurred to produce one unit of output or product. The amount of direct materials that should be used to produce one unit of output or product. The cost of all materials and supplies used to produce one unit of output or product. The price that should be spent to purchase each unit of direct material for production.