Product-Related Data Scientific Business Units produced per year Prime costs 75,000 $250,000 750,000 $2,500,000 1,000,000 Direct labor hours 100,000 50,000 Machine hours 500,000 Production runs 100 150 Inspection hours Maintenance hours 2,000 2,250 3,000 9,000 Department Data Department 1 Department 2 Direct labor hours: Scientific calculator Business calculator 75,000 112,500 25,000 887,500 Total 187,500 912,500 Machine hours: Scientific calculator 25,000 400,000 25,000 100,000 Business calculator Total 425,000 125,000 Overhead costs: Setup costs Inspection costs Power $225,000 175,000 250,000 $225,000 175,000 150,000 250,000 Maintenance 200,000 Total $850,000 $800,000 Required: 1. Compute the overhead cost per unit for each product using a plantwide, unit-based rate using direct labor hours. 2. Compute the overhead cost per unit for each product using departmental rates. In calculating .departmental rates, use machine hours for Department 1 and direct labor hours for Department 2. Repeat using direct labor hours for Department 1 and machine hours for Department 2. 3. Compute the overhead cost per unit for each product using activity-based costing. 4. Comment on the ability of departmental rates to improve the accuracy of product costing.
Product-Related Data Scientific Business Units produced per year Prime costs 75,000 $250,000 750,000 $2,500,000 1,000,000 Direct labor hours 100,000 50,000 Machine hours 500,000 Production runs 100 150 Inspection hours Maintenance hours 2,000 2,250 3,000 9,000 Department Data Department 1 Department 2 Direct labor hours: Scientific calculator Business calculator 75,000 112,500 25,000 887,500 Total 187,500 912,500 Machine hours: Scientific calculator 25,000 400,000 25,000 100,000 Business calculator Total 425,000 125,000 Overhead costs: Setup costs Inspection costs Power $225,000 175,000 250,000 $225,000 175,000 150,000 250,000 Maintenance 200,000 Total $850,000 $800,000 Required: 1. Compute the overhead cost per unit for each product using a plantwide, unit-based rate using direct labor hours. 2. Compute the overhead cost per unit for each product using departmental rates. In calculating .departmental rates, use machine hours for Department 1 and direct labor hours for Department 2. Repeat using direct labor hours for Department 1 and machine hours for Department 2. 3. Compute the overhead cost per unit for each product using activity-based costing. 4. Comment on the ability of departmental rates to improve the accuracy of product costing.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Chapter 4 Activity-Based Costing
Product-Related Data
Scientific
Business
Units produced per year
750,000
$2,500,000
1,000,000
500,000-
75,000
$250,000
Prime costs
Direct labor hours
100,000
50,000
Machine hours
Production runs
100
150
Inspection hours
Maintenance hours
2,000
2,250
3,000
9,000
Department Data
Department 1
Department 2
Direct labor hours:
Scientific calculator
75,000
112,500
25,000
887,500
912,500
Business calculator
Total
187,500
Machine hours:
Scientific calculator
25,000
400,000
425,000
25,000
100,000
Business calculator
Total
125,000
Overhead costs:
Setup costs
Inspection costs
$225,000
175,000
250,000
$225,000
175,000
150,000
250,000
Power
Maintenance
200,000
Total
$850,000
$800,000
Required:
1. Compute the overhead cost per unit for each product using a plantwide, unit-based rate
using direct labor hours.
2. Compute the overhead cost per unit for each product using departmental rates. In calculating
departmental rates, use machine hours for Department 1 and direct labor hours for Department
2. Repeat using direct labor hours for Department 1 and machine hours for Department 2.
3. Compute the overhead cost per unit for each product using activity-based costing.
4. Comment on the ability of departmental rates to improve the accuracy of product costing.
CYBER-RESEARCH CASE
4.39 ABC software is a critical component of an ABC system implementation. ABC software
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