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P13-2 Missouri Company produces two products: Hardware X and Accessory Y. Missouri curently uses a normal cost system in which overhead costs are allocated to products based on direct labor hours. Missouri will be installing new cost accounting software hy end of the current year and it is also considering to adopt the activity-based costing to charge overhead to products instead of using the firm-wide overhead rate that it currently uses. For the fiscal year 2016, Missouri forecasted to produce 5,000 units of Hardware X and 4,000 units of Accessory Y. The production of each hardware requires two direct labor hours and each accessory requires one-half hour. Below is the prime costs included in the each product: Hardware X Accessory Y Direct materials per unit Direct labor per unit P40 P16 P20 P4 Total estimated factory overhead for 2016 is shown below: Budgeted Estimated overhead Volume Machine setups Material handling Packaging and shipping P 90,000 20 setups 140,000 4,000 lbs. 190,000 500 boxes P420,000 Total Based on the analysis of the above overhead activities, it was estimated that the two products would require the following: Hardware X Accessory Y 6 setups 1,000 lbs, 400 boxes Total Machine setups Material handling Packaging and shipping 14 setups • 20 setups 3,000 lbs. 100 boxes 4,000 lbs. 500 boxes a. Unit cost of Hardware X and Accessory Y using a plant-wide overhead rate based on direct labor hours. Required: Calculate the following: D. Activity cost rates for (a) machine setups, (b) material handling and (c) packaging and shipping. C. Onit cost of Hardware X and Accessory Y using the activity-based costing system.

P13-2 Missouri Company produces two products: Hardware X and Accessory Y. Missouri curently uses a normal cost system in which overhead costs are allocated to products based on direct labor hours. Missouri will be installing new cost accounting software hy end of the current year and it is also considering to adopt the activity-based costing to charge overhead to products instead of using the firm-wide overhead rate that it currently uses. For the fiscal year 2016, Missouri forecasted to produce 5,000 units of Hardware X and 4,000 units of Accessory Y. The production of each hardware requires two direct labor hours and each accessory requires one-half hour. Below is the prime costs included in the each product: Hardware X Accessory Y Direct materials per unit Direct labor per unit P40 P16 P20 P4 Total estimated factory overhead for 2016 is shown below: Budgeted Estimated overhead Volume Machine setups Material handling Packaging and shipping P 90,000 20 setups 140,000 4,000 lbs. 190,000 500 boxes P420,000 Total Based on the analysis of the above overhead activities, it was estimated that the two products would require the following: Hardware X Accessory Y 6 setups 1,000 lbs, 400 boxes Total Machine setups Material handling Packaging and shipping 14 setups • 20 setups 3,000 lbs. 100 boxes 4,000 lbs. 500 boxes a. Unit cost of Hardware X and Accessory Y using a plant-wide overhead rate based on direct labor hours. Required: Calculate the following: D. Activity cost rates for (a) machine setups, (b) material handling and (c) packaging and shipping. C. Onit cost of Hardware X and Accessory Y using the activity-based costing system.

FINANCIAL ACCOUNTING
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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currently uses a normal cost system in which overhead costs are allocated to products P13-2 Missouri Company produces two products: Hardware X and Accessory Y. Missouri nased on direct labor hours. Missouri will be installing new cost accounting software by end of the current year and it is also considering to adopt the activity-based costing to charge overhead to products instead of using the firm-wide overhead rate that it currently uses. For the fiscal year 2016, Missouri forecasted to produce 5,000 units of Hardware X and 4,000 units of Accessory Y. The production of each hardware requires two direct labor hours and each accessory requires one-half hour. Below is the prime costs included in the each product: Hardware X Accessory Y Direct materials per unit P40 P16 Direct labor per unit P20 P4 Total estimated factory overhead for 2016 is shown below: Budgeted overhead Estimated Volume P 90,000 20 setups 140,000 4,000 Ibs. 190,000 500 boxes Machine setups Material handling Packaging and shipping Total P420,000 Based on the analysis of the above overhead activities, it was estimated that the two products would require the following: Machine setups Material handling Packaging and shipping Hardware X Accessory Y 6 setups 1,000 lbs. 400 boxes Total 14 setups • 20 setups 4,000 lbs. 500 boxes 3,000 lbs. 100 boxes a. Unit cost of Hardware X and Accessory Y using a plant-wide overhead rate based on direct labor hours. Required: Calculate the following: D. Activity cost rates for (a) machine setups, (b) material handling and (c) packaging and shipping. C. Unit cost of Hardware X and Accessory Y using the activity-based costing system.
Transcribed Image Text:currently uses a normal cost system in which overhead costs are allocated to products P13-2 Missouri Company produces two products: Hardware X and Accessory Y. Missouri nased on direct labor hours. Missouri will be installing new cost accounting software by end of the current year and it is also considering to adopt the activity-based costing to charge overhead to products instead of using the firm-wide overhead rate that it currently uses. For the fiscal year 2016, Missouri forecasted to produce 5,000 units of Hardware X and 4,000 units of Accessory Y. The production of each hardware requires two direct labor hours and each accessory requires one-half hour. Below is the prime costs included in the each product: Hardware X Accessory Y Direct materials per unit P40 P16 Direct labor per unit P20 P4 Total estimated factory overhead for 2016 is shown below: Budgeted overhead Estimated Volume P 90,000 20 setups 140,000 4,000 Ibs. 190,000 500 boxes Machine setups Material handling Packaging and shipping Total P420,000 Based on the analysis of the above overhead activities, it was estimated that the two products would require the following: Machine setups Material handling Packaging and shipping Hardware X Accessory Y 6 setups 1,000 lbs. 400 boxes Total 14 setups • 20 setups 4,000 lbs. 500 boxes 3,000 lbs. 100 boxes a. Unit cost of Hardware X and Accessory Y using a plant-wide overhead rate based on direct labor hours. Required: Calculate the following: D. Activity cost rates for (a) machine setups, (b) material handling and (c) packaging and shipping. C. Unit cost of Hardware X and Accessory Y using the activity-based costing system.
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