Required: 1. Calculate the unit overhead cost of the Special Model using machine hours to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, if rounding is required. per unit Now, repeat the calculation using ABC to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, per unit Did improving the accuracy of cost assignments solve Whitaker's competitive problem? Yes rounding is required. 2. Now, assume that in addition to improving the accuracy of cost assignments, James observes that defective supplier components are the root cause of both the inspection and rework activities. Suppose further that Whitaker has found a new supplier to such that inspection and rework costs are reduced by 50 percent. Now, calculate the cost of the Special Model (assuming that inspection and rework times are also reduced by 50 percent) using ABC. The relative consumption patterns also remain the san and your final answer to the nearest cent, if rounding is required. s per unit
Required: 1. Calculate the unit overhead cost of the Special Model using machine hours to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, if rounding is required. per unit Now, repeat the calculation using ABC to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, per unit Did improving the accuracy of cost assignments solve Whitaker's competitive problem? Yes rounding is required. 2. Now, assume that in addition to improving the accuracy of cost assignments, James observes that defective supplier components are the root cause of both the inspection and rework activities. Suppose further that Whitaker has found a new supplier to such that inspection and rework costs are reduced by 50 percent. Now, calculate the cost of the Special Model (assuming that inspection and rework times are also reduced by 50 percent) using ABC. The relative consumption patterns also remain the san and your final answer to the nearest cent, if rounding is required. s per unit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Whitaker Company produces two models of blenders for restaurants: the "Super Model" (priced at $395) and the "Special Model" (priced at $200). Recently, Whitaker has been losing market share with its Special Model because of competitors offering blenders with the same quality and
features but at a lower price. A careful market study revealed that if Whitaker could reduce the price of its Special Model to $180, it would regain its former share of the market. Management, however, is convinced that any price reduction must be accompanied by a cost reduction of the same
amount so that per-unit profitability is not affected. James Davis, company controller, has indicated that poor overhead costing assignments may be distorting management's view of each product's cost and, therefore, the ability to know how to set selling prices. James has identified the
following overhead activities: machining, inspection, and rework. The three activities, their costs, and practical capacities are as follows:
Activity Cost
Practical Capacity
Machining $5,398,500 91,500 machine hours
Inspection 3,731,000 45,500 inspection hours
1,848,000 46,200 rework hours
Rework
The consumption patterns of the two products are as follows:
Required:
Special
100,000
Units
Machine hours
50,900
Inspection hours
10,500
Rework hours
8,000
Whitaker assigns overhead costs to the two products using a plantwide rate based on machine hours.
Super
26,900
40,600
35,000
38,200
1. Calculate the unit overhead cost of the Special Model using machine hours to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, if rounding is required.
per unit
$
Now, repeat the calculation using ABC to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, if rounding is required.
per unit
Yes ▾
Did improving the accuracy of cost assignments solve Whitaker's competitive problem?
2. Now, assume that in addition to improving the accuracy of cost assignments, James observes that defective supplier components are the root cause of both the inspection and rework activities. Suppose further that Whitaker has found a new supplier that provides higher-quality components
such that inspection and rework costs are reduced by 50 percent. Now, calculate the cost of the Special Model (assuming that inspection and rework times are also reduced by 50 percent) using ABC. The relative consumption patterns also remain the same. Round intermediate calculations
and your final answer to the nearest cent, if rounding is required.
per unit
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