Single Plantwide Rate and Activity-Based CostingWhirlpool Corporation (WHR) conducted an activity-based costing study of its Evansville, Indiana, plant in order to identify its most profitable products. Assume thatwe select three representative refrigerators (out of 333): one low-, one medium-, and one high-volume refrigerator. Additionally, we assume the following activity-baseinformation for each of the three refrigerators:Three RepresentativeNumber of MachineNumber ofNumber of SalesNumber ofRefrigeratorsHoursSetupsOrdersUnitsRefrigerator-Low Volume241438160Refrigerator-Medium Volume22513881,500Refrigerator-High Volume9001206,000Prior to conducting the study, the factory overhead allocation was based on a single machine hour rate. The machine hour rate was $200 per hour. After conducting theactivity-based costing study, assume that three activities were used to allocate the factory overhead. The new activity rate information is assumed to be as follows:Sales OrderMachining ActivitySetup ActivityProcessing ActivityActivity rate$160$240$55a. Complete the following table, using the single machine hour rate to determine the per-unit factory overhead for each refrigerator (Column A) and the three activity-based rates to determine the activity-based factory overhead per unit (Column B). Finally, compute the percent change in per-unit allocation from the single to activity-based rate methods (Column C).If required, round all per unit answers to the nearest cent. Round percents to one decimal place. For column C, use the minus sign to indicate a negative ordecrease.Column AColumn BColumn CSingle RateАВСOverhead AllocationOverhead AllocationPercent Change in based rates to determine the activity-based factory overhead per unit (Column B). Finally, compute the percent change in per-unit allocation from the single to activity-based rate methods (Column C).If required, round all per unit answers to the nearest cent. Round percents to one decimal place. For column C, use the minus sign to indicate a negative ordecrease.Column AColumn BColumn CSingle RateАВСOverhead AllocationOverhead AllocationPercent Change inProduct Volume ClassPer UnitPer UnitAllocationLow$$%Medium$%High2$%b. Why is the traditional overhead rate per machine hour greater under the single rate method than under the activity-based method?The machine hour rate is greater under the single-rate method than under the activity-based method because theallocated by machine hoursunder the single-rate method. However, only a portion of the factory overhead is allocated under the machine rate method using activity-based costing. The remainingfactory overhead is allocated using theThus, thefor determining the machine hour rate under activity-based costing mustbe less than the numerator under the single machine hour rate method.c. Interpret Column C in your table from part (A).Column C indicates that under activity-based costing the low-volume product has aper-unit cost than calculated under the single-rate method. Incontrast, under activity-based costing the high-volume product has aper-unit cost than calculated under the single-rate method. This result willoccur when there are activities that occur in proportions different from their volumes. In this case,-volume products have setups and sales ordersoccurring in higher proportions of total setups and sales orders than their proportion of machine hours to total machine hours. The opposite is the case for the-volume product. Thus, the low-volume products are produced and ordered inbatch sizes compared to the high-volumeproduct. This implies that Whirlpool may wish to simplify its product line by eliminating some of the-volume products or by attempting to reducethe overall cost of setup and sales order processing activities.

Activity Based Costing While implementing the activity based costing it monetarize the total…

Answered: Refrigerator-High Volume 900 9 120…

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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A company makes two products 1 and 2. The finishing activity pool has estimated manufacuring costs of $81,411 and the cost drivers for Product 1 is 400 and 262 for Product 2. The assembling activity pool has estimated costs of $62,196 and the cost drivers for Product 1 is 200 and 300 for Product 2. Direct labor hours for Product 1 is 452and 114 for Product 2. What is the total manufacturing overhead cost to be assigned to Product 1 using a single overhead rate as under tradional cost accounting?
Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours. Overhead DirectLabor Hours (dlh) Product A B Painting Dept. $259,500 10,600 dlh 12 dlh 7 dlh Finishing Dept. 72,700 8,000 2 16 Totals $332,200 18,600 dlh 14 dlh 23 dlh The factory overhead allocated per unit of Product B in the Painting Department if Blue Ridge Marketing Inc. uses the multiple production department factory overhead rate method is a.$63.61 per unit b.$125.02 per unit c.$24.48 per unit d.$171.36 per unit
Assume a company manufactures only two products—14,000 units of Product C and 6,000 units of Product D. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to three cost pools. The following additional information is available for the company as a whole and for Products C and D: Activity Cost Pool Activity Measure Estimated Overhead Cost Expected Activity Machining Machine-hours $ 300,000 15,000 MH Machine setups Number of setups $ 150,000 200 Setups Product design Number of products $ 78,000 2 Products Activity Measure Product C Product D Machine-hours 9,000 6,000 Number of setups 50 150 Number of products 1 1 Using the ABC system, how much total overhead cost would be assigned from all of the activities to Product D? Multiple Choice $271,500 $261,500 $301,500 $251,500
A company makes two products 1 and 2. The finishing activity pool has estimated manufacuring costs of $96,443 and the cost drivers for Product 1 is 200 and 500 for Product 2. The assembling activity pool has estimated costs of $69,074 and the cost drivers for Product 1 is 350 and 275 for Product 2. Direct labor hours for Product 1 is 353 and 231 for Product 2. What is the total manufacturing overhead rate to be used under traditional cost accounting? Round your final answer to the nearest whole dollar and do not write a dollar sign.
Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $35.29 per unit, while product B has been assigned $8.25 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: Cost Pools Activity Costs Cost Drivers Activity Driver Consumption Machine setup $ 261,000 Setup hours 3,000 Materials handling 153,000 Pounds of materials 17,000 Electric power 38,000 Kilowatt-hours 38,000 The following cost information pertains to the production of A and B, just two of Hakara's many products: A B Number of units produced 4,000 20,000 Direct materials cost $ 37,000 $ 27,000 Direct labor cost $ 41,000 $ 40,000 Number of setup hours 200 200 Pounds of materials used 1,000…
Groleau Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other. The company's overhead costs, which consist of factory utilities and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Costs in the Processing cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the two products and the company's costs and activity-based costing system appear below: Factory utilities (total) Indirect labor (total) $37,500 $15,600 Distribution of Resource Consumption Across Activity Cost Pools Processing Setting Up Other Factory utilities 0.30 0.30 0.40 Indirect labor 0.30 0.10 0.60 MHs Batches Product S8 3,100 1,500 Product F1 7,600 1,100 Total 10,700 2,600 Product S8 Product F1 Sales (total) Direct…
Hochberg Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost Pool Total Activity Fabrication 30,000 machine-hours Order processing 300 orders Other Not applicable The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: Wages and salaries $340,000 Depreciation Occupancy Total 160,000 220,000 $720,000 The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Fabrication Order Processing Other Total Wages and salaries 30% 60% 10% 100% Depreciation 15% 50% 35% 100% Occupancy 15% 55% 30% 100% The activity rate for the Fabrication activity cost pool is: A) $5.30 per machine-hour B) $3.60 per machine-hour C) $7.20 per machine-hour D) $4.80 per machine-hour
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Craft Company reports the following partial activity-based costing information for its Deluxe model. Complete the table by entering amounts for the missing items. Note: Round "Overhead per unit" to 2 decimal places. Activity Assembly Factory services Setup Total allocated cost Units produced Overhead cost per unit Activity Usage 3,000 direct labor hours 2,800 square feet setups $ $ Activity Rate 10 per direct labor hour per square foot 180 per setup Allocated Cost 28,000 4,500 2,500
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Labor-related Purchase orders Parts management Board etching General factory Activity Measure Direct labor-hours Number of orders Number of part types Number of boards Machine-hours Expected Overhead Cost $ 233,600 $ 9,360 $ 80,000 $59,850 $ 236,500 Expected Activity 29,200 DLHS 234 orders 100 part types 1,710 boards 21,500 MHS Required: 1. Compute the activity rate for each of the activity cost pools. 2. The expected activity for the year was distributed among the company's four products as follows: Expected Activity Activity Cost Pool Labor-related (DLHS) Purchase orders (orders) Parts management (part types) Board etching (boards) General factory (MHs) Product A Product B Product C Product D 4,400 74 25 430 3,300 16,100 29 3,300 50 44 530 5,400 81 13 18 750 8,100 3,600 6,500 Using the…
Data concerning three of Kilmon Corporation’s activity cost pools appear below: Activity Cost Pools Estimated Overhead Cost Expected Activity Assembling products $ 65,540 4,520 assembly hours Designing products $ 578,112 3,011 product design hours Setting up batches $ 41,820 820 batch set-ups Required: Compute the activity rates for each of the three cost pools. (Round your answers to 2 decimal places.) Activities Activity rate Assembly products Designing products Setting up batches

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