P9.1 (LO 1, 2, 3), AP When Jasmine realized how small the margin was for her main product, she was aghast. She knew the company had already achieved significant direct materials savings by partnering with its supplier. The consultant brought in last year further streamlined labor usage, bringing her to best-in-class levels for labor. The only other area to look at was overhead.Total MOH costs this coming year are estimated at $2,100,000. Three key activities are the primary causes of total MOH. They are identified as follows, including the budgeted cost, budgeted cost driver, and budgeted cost driver quantities for each.Activity Budgeted Cost Budgeted Quantity of Cost Driver Main Product’s Use of Cost DriverCutting $ 600,000 60,000 machine hours 8,000Fabrication 1,200,000 120,000 direct labor hours 20,000Inspection 300,000 20,000 inspection hours 2,000Total $2,100,000 RequiredAssuming the company uses one plant-wide rate based on DL hours to allocate MOH, calculate that rate and determine total allocated MOH for the main product.If the company instead breaks MOH into the key activities above, calculate the appropriate activity rates and subsequent allocated overhead cost to the main product.Compare the allocations using the plant-wide rate versus the activity-based rates. Do the ABC allocations alleviate any of Jasmine’s concerns about the low margin of this product?What additional insight does the activity information provide to Jasmine as she considers the margin for this product? tions.P9.1 (LO 1, 2, 3), AP When Jasmine realized how small the margin was for her main product, she was aghast. She knewthe company had already achieved significant direct materials savings by partnering with its supplier. The consultantbrought in last year further streamlined labor usage, bringing her to best-in-class levels for labor. The only other area tolook at was overhead.Total MOH costs this coming year are estimated at $2,100,000. Three key activities are the primary causes of total MOH.They are identified as follows, including the budgeted cost, budgeted cost driver, and budgeted cost driver quantities foreach.Activity Budgeted Cost Budgeted Quantity of Cost Driver Main Product's Use of Cost DriverCutting$ 600,00060,000 machine hours8,000Fabrication120,000 direct labor hours20,0001,200,000300,000InspectionTotal20,000 inspection hours2,000$2,100,000Requireda. Assuming the company uses one plant-wide rate based on DL hours to allocate MOH, calculate that rate anddetermine total allocated MOH for the main product.b. If the company instead breaks MOH into the key activities above, calculate the appropriate activity rates andsubsequent allocated overhead cost to the main product.c. Compare the allocations using the plant-wide rate versus the activity-based rates. Do the ABC allocations alleviate anyof Jasmine's concerns about the low margin of this product?d. What additional insight does the activity information provide to Jasmine as she considers the margin for this product?

A plant-wide allocation is a traditional approach where the total budgeted cost is divided by a…

P9.1 (LO 1, 2, 3), AP When Jasmine realized how small the margin was for her main product, she was aghast. She knew the company had already achieved significant direct materials savings by partnering with its supplier. The consultant brought in last year further streamlined labor usage, bringing her to best-in-class levels for labor. The only other area to look at was overhead. Total MOH costs this coming year are estimated at $2,100,000. Three key activities are the primary causes of total MOH. They are identified as follows, including the budgeted cost, budgeted cost driver, and budgeted cost driver quantities for each. Activity Budgeted Cost Budgeted Quantity of Cost Driver Main Product’s Use of Cost Driver Cutting $ 600,000 60,000 machine hours 8,000 Fabrication 1,200,000 120,000 direct labor hours 20,000 Inspection 300,000 20,000 inspection hours 2,000 Total $2,100,000 Required Assuming the company uses one plant-wide rate based on DL hours to allocate MOH, calculate that rate and determine total allocated MOH for the main product. If the company instead breaks MOH into the key activities above, calculate the appropriate activity rates and subsequent allocated overhead cost to the main product. Compare the allocations using the plant-wide rate versus the activity-based rates. Do the ABC allocations alleviate any of Jasmine’s concerns about the low margin of this product? What additional insight does the activity information provide to Jasmine as she considers the margin for this product?

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

Concept explainers

Question

P9.1 (LO 1, 2, 3), AP When Jasmine realized how small the margin was for her main product, she was aghast. She knew the company had already achieved significant direct materials savings by partnering with its supplier. The consultant brought in last year further streamlined labor usage, bringing her to best-in-class levels for labor. The only other area to look at was overhead. Total MOH costs this coming year are estimated at $2,100,000. Three key activities are the primary causes of total MOH. They are identified as follows, including the budgeted cost, budgeted cost driver, and budgeted cost driver quantities for each. Activity Budgeted Cost Budgeted Quantity of Cost Driver Main Product’s Use of Cost Driver Cutting $ 600,000 60,000 machine hours 8,000 Fabrication 1,200,000 120,000 direct labor hours 20,000 Inspection 300,000 20,000 inspection hours 2,000 Total $2,100,000 Required Assuming the company uses one plant-wide rate based on DL hours to allocate MOH, calculate that rate and determine total allocated MOH for the main product. If the company instead breaks MOH into the key activities above, calculate the appropriate activity rates and subsequent allocated overhead cost to the main product. Compare the allocations using the plant-wide rate versus the activity-based rates. Do the ABC allocations alleviate any of Jasmine’s concerns about the low margin of this product? What additional insight does the activity information provide to Jasmine as she considers the margin for this product?

tions.
P9.1 (LO 1, 2, 3), AP When Jasmine realized how small the margin was for her main product, she was aghast. She knew
the company had already achieved significant direct materials savings by partnering with its supplier. The consultant
brought in last year further streamlined labor usage, bringing her to best-in-class levels for labor. The only other area to
look at was overhead.
Total MOH costs this coming year are estimated at $2,100,000. Three key activities are the primary causes of total MOH.
They are identified as follows, including the budgeted cost, budgeted cost driver, and budgeted cost driver quantities for
each.
Activity Budgeted Cost Budgeted Quantity of Cost Driver Main Product's Use of Cost Driver
Cutting
$ 600,000
60,000 machine hours
8,000
Fabrication
120,000 direct labor hours
20,000
1,200,000
300,000
Inspection
Total
20,000 inspection hours
2,000
$2,100,000
Required
a. Assuming the company uses one plant-wide rate based on DL hours to allocate MOH, calculate that rate and
determine total allocated MOH for the main product.
b. If the company instead breaks MOH into the key activities above, calculate the appropriate activity rates and
subsequent allocated overhead cost to the main product.
c. Compare the allocations using the plant-wide rate versus the activity-based rates. Do the ABC allocations alleviate any
of Jasmine's concerns about the low margin of this product?
d. What additional insight does the activity information provide to Jasmine as she considers the margin for this product?

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 6 steps

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.