Please Answer part 4. Part 1-3 answersPart 1Computation of Cost Allocation Rate for each activity:ActivityCostsBase usageAllocation rate Material Handling160,00020,0008 Packaging390,0002,000195 Quality Assurance112,0001,60070 Total662,000 Part 2Activity Usage of All Activities:Activity CommercialTravelTotalMaterial Handling8700445013,150Packaging9003001,200Quality Assurance270370640 Allocation of Cost basis Usage: ActivityCommercialTravelMaterial Handling69,60035600(Activity Usage * Cost Allocation Rate)(8,700 * 8)(4450 * 8)Packaging175,50058500Quality Assurance18,90025900Total264,000120000Units Produced3,00020000Cost Per Unit886 Part 3ParticularsCommercialTravelUsage of Machine Hour900300Allocation Rate350350Allocation Value315,000105,000Units Produced3,00020,000Cost Per Unit1055.25 **Title: Comprehensive ABC Implementation at Durbin Pharmaceuticals****Objective:**This educational module focuses on the application of Activity-Based Costing (ABC) in a manufacturing context by analyzing Durbin Pharmaceuticals' strategy to expand their product reach into new markets.**Background:**Durbin Pharmaceuticals produces a commercial-container product named "Breathe" to target additional markets outside its typical customer base. They plan to manufacture three product variations to appeal to different geographic needs. Each of the products requires distinct packaging and quality assurance procedures.**ABC Implementation at Durbin:**At the forefront of implementing ABC in the company, Sarah Bradley and Dennis Williams are responsible for allocating overhead costs more accurately. Their primary goal is to understand how costs are distributed across various functions of the business, such as materials handling, packaging, and quality assurance.**Cost Allocation Details:**- **Activity Costs and Allocation Base:** - **Materials handling:** $160,000 allocated based on 20,000 kilos. - **Packaging:** $390,000 allocated based on 2,000 machine hours. - **Quality assurance:** $142,000 allocated based on 1,600 samples.**Production Details:**The production batch consist of:- Total weight: 8,700 kilos- Machine hours: 900 - Samples: 270**Cost Breakdown:**- 4,450 kilos,- 300 machine hours, and- 100 samples used for three-wrapped squares.- The remaining output is distributed for Breathe and two-wrapped packs with the following quantities: - Breathe: 3,000 kilos - Wrapped packs: 20,000 packs**Learning Requirements:**1. **Cost Allocation Rates:** - Calculate the cost allocation rate for each activity.2. **Determine Unit Cost:** - Evaluate the indirect cost per commercial-container variant. - Compute the total activity cost for each type of product, breaking down by allocation base.3. **Activity Costs per Unit:** - Analyze the activity-based costs for bundled products. - Combine direct materials and direct labor with activity-based costs.4. **Comparative Analysis:** - Compare and analyze unit costs using the ABC system against traditional costing methods. - Reflect on any discrepancies or changes in cost distribution and the rationale behind these differences.**Conclusion:**This analysis aims to showcase how different costing methodologies can impact product pricing and resource allocation. By

Activity based costing (ABC) is the costing method which allocates the overheads (activity…

Operations, and the Costs of Quality P4-43A Comprehensive ABC implementation Leaming Objectives 2& 3) Durbin Pharmaceuticals manufactures an overthe-counter allergy medication called Breathe. Durbin is trying to win market share from Sudafed and Tylenol. The company has developed several different Breathe products tailored to specific markets. For example. the company sells large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels Durbin's controller, Katarina Holfman, has just retuned from a conference on ABC. She asks Bradley Williams, supervisor of the Breathe product line, to help her develop an AlBC system. Hoffman and Williams identify the following activities, related costs, and cost allocation bases: Estimated Indirect Activity Costs Estimated Quantity of Allocation Base Allocation Base Materials handling. $160,000 Kilos 20,000 kilos Packaging Quality assurance Total indirect costs.. 390,000 Machine hours 2,000 hours 112.000 Samples 1,600 samples S062.000 The commercial-container Breathe product line had a total weight of 8,700 kilos, used 900 machine hours, and required 270 samples. The travel-pack line had a total weight of 4,450 kilos, used 300 machine hours, and required 370 samples. Durbin produced 3,000 commercial containers of Breathe and 20,000 travel packs. Requirements 1. Compute the cost allocation rate for each activity. 2. Use the activity-based cost allocation rates to compute the indirect cost of each unit of the commercial containers and the travel packs. (Hint: Compute the total activity costs allocated to each product line and then compute the cost per unit.) 3. The company's original single-allocation based cost system allocated indirect costs to products at $350 per machine hour. Compute the total indirect costs allocated to the commercial containers and to the travel packs under the original system. Then com- pute the indirect cost per unit for each product. 4. Compare the activity-based costs per unit to the costs from the original system. How have the unit costs changed? Explain why the costs changed as they did.

Operations, and the Costs of Quality P4-43A Comprehensive ABC implementation Leaming Objectives 2& 3) Durbin Pharmaceuticals manufactures an overthe-counter allergy medication called Breathe. Durbin is trying to win market share from Sudafed and Tylenol. The company has developed several different Breathe products tailored to specific markets. For example. the company sells large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels Durbin's controller, Katarina Holfman, has just retuned from a conference on ABC. She asks Bradley Williams, supervisor of the Breathe product line, to help her develop an AlBC system. Hoffman and Williams identify the following activities, related costs, and cost allocation bases: Estimated Indirect Activity Costs Estimated Quantity of Allocation Base Allocation Base Materials handling. $160,000 Kilos 20,000 kilos Packaging Quality assurance Total indirect costs.. 390,000 Machine hours 2,000 hours 112.000 Samples 1,600 samples S062.000 The commercial-container Breathe product line had a total weight of 8,700 kilos, used 900 machine hours, and required 270 samples. The travel-pack line had a total weight of 4,450 kilos, used 300 machine hours, and required 370 samples. Durbin produced 3,000 commercial containers of Breathe and 20,000 travel packs. Requirements 1. Compute the cost allocation rate for each activity. 2. Use the activity-based cost allocation rates to compute the indirect cost of each unit of the commercial containers and the travel packs. (Hint: Compute the total activity costs allocated to each product line and then compute the cost per unit.) 3. The company's original single-allocation based cost system allocated indirect costs to products at $350 per machine hour. Compute the total indirect costs allocated to the commercial containers and to the travel packs under the original system. Then com- pute the indirect cost per unit for each product. 4. Compare the activity-based costs per unit to the costs from the original system. How have the unit costs changed? Explain why the costs changed as they did.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Computation of Cost Allocation Rate for each activity:
Activity	Costs	Base usage	Allocation rate
Material Handling	160,000	20,000	8
Packaging	390,000	2,000	195
Quality Assurance	112,000	1,600	70
Total	662,000

Activity Usage of All Activities:
Activity	Commercial	Travel	Total
Material Handling	8700	4450	13,150
Packaging	900	300	1,200
Quality Assurance	270	370	640

Allocation of Cost basis Usage:
Activity	Commercial	Travel
Material Handling	69,600	35600
(Activity Usage * Cost Allocation Rate)	(8,700 * 8)	(4450 * 8)
Packaging	175,500	58500
Quality Assurance	18,900	25900
Total	264,000	120000
Units Produced	3,000	20000
Cost Per Unit	88	6

Particulars	Commercial	Travel
Usage of Machine Hour	900	300
Allocation Rate	350	350
Allocation Value	315,000	105,000
Units Produced	3,000	20,000
Cost Per Unit	105	5.25