Redfern Audio produces audio equipment including headphones. At the Campus Facility, it produces two wireless models, Standard and Enhanced, which differ both in the materials and components used and in the labor skill required. Data for the Campus Plant for the third quarter follow. Units produced Machine-hours Direct labor-hours Standard 24,000 Enhanced Direct materials costs Direct labor costs 14,400 18,000 $ 518,400 311,040 8,000 9,600 18,000 $ 777,600 660,960 Total 32,000 24,000 36,000 $ 1,296,000 972,000 887,040 $ 3,155,040 Manufacturing overhead Total costs Required: a. Compute the individual product costs per unit assuming that Redfern Audio uses the number of units to allocate overhead to the products. b. Compute the individual product costs per unit assuming that Redfern Audio uses direct labor hours to allocate overhead to the products. c. Compute the individual product costs per unit assuming that Redfern Audio uses machine hours to allocate overhead to the products.

Redfern Audio produces audio equipment including headphones. At the Campus Facility, it produces two wireless models, Standard and Enhanced, which differ both in the materials and components used and in the labor skill required. Data for the Campus Plant for the third quarter follow. Units produced Machine-hours Direct labor-hours Standard 24,000 Enhanced Direct materials costs Direct labor costs 14,400 18,000 $ 518,400 311,040 8,000 9,600 18,000 $ 777,600 660,960 Total 32,000 24,000 36,000 $ 1,296,000 972,000 887,040 $ 3,155,040 Manufacturing overhead Total costs Required: a. Compute the individual product costs per unit assuming that Redfern Audio uses the number of units to allocate overhead to the products. b. Compute the individual product costs per unit assuming that Redfern Audio uses direct labor hours to allocate overhead to the products. c. Compute the individual product costs per unit assuming that Redfern Audio uses machine hours to allocate overhead to the products.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 27E: Plata Company has identified the following overhead activities, costs, and activity drivers for the...

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Business Specialty, Inc., manufactures two staplers: small and regular. The standard quantities of direct labor and direct materials per unit for the year are as follows: The standard price paid per pound of direct materials is 1.60. The standard rate for labor is 8.00. Overhead is applied on the basis of direct labor hours. A plantwide rate is used. Budgeted overhead for the year is as follows: The company expects to work 12,000 direct labor hours during the year; standard overhead rates are computed using this activity level. For every small stapler produced, the company produces two regular staplers. Actual operating data for the year are as follows: a. Units produced: small staplers, 35,000; regular staplers, 70,000. b. Direct materials purchased and used: 56,000 pounds at 1.5513,000 for the small stapler and 43,000 for the regular stapler. There were no beginning or ending direct materials inventories. c. Direct labor: 14,800 hours3,600 hours for the small stapler and 11,200 hours for the regular stapler. Total cost of direct labor: 114,700. d. Variable overhead: 607,500. e. Fixed overhead: 350,000. Required: 1. Prepare a standard cost sheet showing the unit cost for each product. 2. Compute the direct materials price and usage variances for each product. Prepare journal entries to record direct materials activity. 3. Compute the direct labor rate and efficiency variances for each product. Prepare journal entries to record direct labor activity. 4. Compute the variances for fixed and variable overhead. Prepare journal entries to record overhead activity. All variances are closed to Cost of Goods Sold. 5. Assume that you know only the total direct materials used for both products and the total direct labor hours used for both products. Can you compute the total direct materials and direct labor usage variances? Explain.
Stacks manufactures two different levels of hockey sticks: the Standard and the Slap Shot. The total overhead of $600,000 has traditionally been allocated by direct labor hours, with 400,000 hours for the Standard and 200.000 hours for the Slap Shot. After analyzing and assigning costs to two cost pools, it was determined that machine hours is estimated to have $450.000 of overhead, with 30,000 hours used on the Standard product and 15,000 hours used on the Slap Shot product. It was also estimated that the inspection cost pool would have $150,000 of overhead, with 25,000 hours for the Standard and 5,000 hours for the Slap Shot. What is the overhead rate per product, under traditional and under ABC costing?
The Lubbock plant of Morrils Small Motor Division produces a major subassembly for a 6.0 horsepower motor for lawnmowers. The plant uses a standard costing system for production costing and control. The standard cost sheet for the subassembly follows: During the year, the Lubbock plant had the following actual production activity: a. Production of subassemblies totaled 50,000 units. b. A total of 260,000 pounds of raw materials was purchased at 4.70 per pound. c. There were 60,000 pounds of raw materials in beginning inventory (carried at 5 per lb.) There was no ending inventory. d. The company used 82,000 direct labor hours at a total cost of 1,066,000. The Lubbock plants practical activity is 60,000 units per year. Standard overhead rates are computed based on practical activity measured in standard direct labor hours. Required: 1. CONCEPTUAL CONNECTION Compute the materials price and usage variances. Of the two materials variances, which is viewed as the more controllable? To whom would you assign responsibility for the usage variance in this case? Explain. 2. CONCEPTUAL CONNECTION Compute the labor rate and efficiency variances. Who is usually responsible for the labor efficiency variance? What are some possible causes for this variance? 3. CONCEPTUAL CONNECTION Assume that the purchasing agent for the small motors plant purchased a lower-quality raw material from a new supplier. Would you recommend that the plant continue to use this cheaper raw material? If so, what standards would likely need revision to reflect this decision? Assume that the end products quality is not significantly affected. 4. Prepare all possible journal entries.
Fisico Company produces exercise bikes. One of its plants produces two versions: a standard model and a deluxe model. The deluxe model has a wider and sturdier base and a variety of electronic gadgets to help the exerciser monitor heartbeat, calories burned, distance traveled, etc. At the beginning of the year, the following data were prepared for this plant: Additionally, the following overhead activity costs are reported: Required: 1. Calculate the cost per unit for each product using direct labor hours to assign all overhead costs. 2. Calculate activity rates and determine the overhead cost per unit. Compare these costs with those calculated using the unit-based method. Which cost is the most accurate? Explain.
Lansing. Inc., provided the following data for its two producing departments: Machine hours are used to assign the overhead of the Molding Department, and direct labor hours are used to assign the overhead of the Polishing Department. There are 30,000 units of Form A produced and sold and 50,000 of Form B. Required: 1. Calculate the overhead rates for each department. 2. Using departmental rates, assign overhead to live two products and calculate the overhead cost per unit. How does this compare with the plantwide rate unit cost, using direct labor hours? 3. What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form B and the direct labor hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overhead cost per unit for each product using departmental rates, and compare with the plantwide rate unit costs calculated in Requirement 2. What can you conclude from this outcome?
Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard cost sheet: Algers computes its overhead rates using practical volume, which is 54,000 units. The actual results for the year are as follows: a. Units produced: 53,000 b. Direct materials purchased: 274,000 pounds at 2.50 per pound c. Direct materials used: 270,300 pounds d. Direct labor: 40,100 hours at 17.95 per hour e. Fixed overhead: 161,700 f. Variable overhead: 122,000 Required: 1. Compute price and usage variances for direct materials. 2. Compute the direct labor rate and labor efficiency variances. 3. Compute the fixed overhead spending and volume variances. Interpret the volume variance. 4. Compute the variable overhead spending and efficiency variances. 5. Prepare journal entries for the following: a. The purchase of direct materials b. The issuance of direct materials to production (Work in Process) c. The addition of direct labor to Work in Process d. The addition of overhead to Work in Process e. The incurrence of actual overhead costs f. Closing out of variances to Cost of Goods Sold
Eclipse Motor Company manufactures two types of specialty electric motors, a commercial motor and a residential motor, through two production departments, Assembly and Testing. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering using the multiple production department factory overhead rate method. The following factory overhead was budgeted for Eclipse: Direct machine hours were estimated as follows: In addition, the direct machine hours (dmh) used to produce a unit of each product in each department were determined from engineering records, as follows: a. Determine the per-unit factory overhead allocated to the commercial and residential motors under the single plantwide factory overhead rate method, using direct machine hours as the allocation base. b. Determine the per-unit factory overhead allocated to the commercial and residential motors under the multiple production department factory overhead rate method, using direct machine hours as the allocation base for each department. c. Recommend to management a product costing approach, based on your analyses in (a) and (b). Support your recommendation.
Pelder Products Company manufactures two types of engineering diagnostic equipment used in construction. The two products are based upon different technologies, X-ray and ultrasound, but are manufactured in the same factory. Pelder has computed the manufacturing cost of the X-ray and ultrasound products by adding together direct materials, direct labor, and overhead cost applied based on the number of direct labor hours. The factory has three overhead departments that support the single production line that makes both products. Budgeted overhead spending for the departments is as follows: Pelders budgeted manufacturing activities and costs for the period are as follows: The budgeted cost to manufacture one ultrasound machine using the activity-based costing method is: a. 225. b. 264. c. 293. d. 305.
Redfern Audio produces audio equipment including headphones. At the Campus Facility, it produces two wireless models, Standard and Enhanced, which differ both in the materials and components used and in the labor skill required. Data for the Campus Plant for the third quarter follow. Units produced Machine-hours Direct labor-hours Direct materials costs Direct labor costs Manufacturing overhead Total costs Standard 24,000 14,400 18,000 480,000 288,000 Predetermined overhead rate Enhanced 8,000 9,600 18,000 $ 720,000 612,000 Total 1% of materials cost 32,000 24,000 36,000 Required: Compute the predetermined overhead rate assuming that Redfern Audio uses direct material costs to allocate overhead costs. $ 1,200,000 900,000 864,000 $ 2,964,000
Redfern Audio produces audio equipment including headphones. At the Campus Facility, it produces two wireless models, Standard and Enhanced, which differ both in the materials and components used and in the labor skill required. Data for the Campus Plant for the third quarter follow. Units produced Machine-hours Direct labor-hours Direct materials costs Direct labor costs Manufacturing overhead Total costs Standard 24,000 14,400 18,000 $ 480,000 288,000 Predetermined overhead rate Enhanced 8,000 9,600 18,000 $ 720,000 612,000 Total per direct labor hour 32,000 24,000 36,000 Required: Compute the predetermined overhead rate assuming that Redfern Audio uses direct labor-hours to allocate overhead costs. $ 1,200,000 900,000 864,000 $ 2,964,000
Redfern Audio produces audio equipment including headphones. At the Campus Facility, it produces two wireless models, Standard and Enhanced, which differ both in the materials and components used and in the labor skill required. Data for the Campus Plant for the third quarter follow. Standard Enhanced Total Units produced 24,000 8,000 32,000 Machine-hours 14,400 9,600 24,000 Direct labor-hours 18,000 18,000 36,000 Direct materials costs $ 523,200 $ 784,800 $ 1,308,000 Direct labor costs 324,000 666,000 990,000 Manufacturing overhead 950,400 Total costs $ 3,248,400 Required: Compute the individual product costs per unit assuming that Redfern Audio uses direct labor costs to allocate overhead to the products. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Standard Enhanced Product costs per unit Compute the individual product costs per unit assuming that Redfern Audio…
Redfern Audio produces audio equipment including headphones. At the Campus Facility, it produces two wireless models, Standard and Enhanced, which differ both in the materials and components used and in the labor skill required. Data for the Campus Plant for the third quarter follow. Standard Enhanced Total Units produced 25,500 8,500 34,000 Machine-hours 15,300 10,200 25,500 Direct labor-hours 19,125 19,125 38,250 Direct materials costs $ 510,000 $ 765,000 $ 1,275,000 Direct labor costs 306,000 650,250 956,250 Manufacturing overhead 841,500 Total costs Compute the predetermined overhead rate assuming that Redfern Audio uses direct labor costs to allocate overhead costs. Note: Round your answer to 2 decimal places. Predetermined overhead rate % of direct labor cost