Scenario IV: Goodmark Company produces two types of birthday cards: scented and regular. Expected product data for the coming year are given below. Overhead costs are identified by activity. Scented Cards Regular Cards Total Units produced 20,000 200,000 - Prime costs $160,000 $1,500,000 $1,660,000 Direct labor hours 20,000 160,000 180,000 Number of setups 60 40 100 Machine hours 10,000 80,000 90,000 Inspection hours 2,000 16,000 18,000 Number of moves 180 120 300 Overhead costs: Setting up equipment $240,000 Moving materials 120,000 Machining 200,000 Inspecting products 160,000 Required: 1. Answer the following questions: a. Calculate the activity consumption ratios for Scented cards (round to two decimal places). Setups: Moving materials: Machining: Inspection: b. If only one rate based on direct labor hours were used to assign overhead, Scented Cards would receive about ________ percent of the total overhead. Upon comparing this overhead assignment with the activity consumption ratios calculated in part a, it is clear that a plantwide rate would the activity-based cost assignments. 2. Calculate the four activity rates (round to the nearest cent). Setups: per setup Moving materials: per move Machining: per machine hour Inspection: per inspection hour 3. Calculate the total unit costs using activity rates to assign overhead (round to the nearest cent). Scented: Regular:

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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Cornerstones of Cost Management 4th Ed. - Chapter 4

Scenario IV: Goodmark Company produces two types of birthday cards: scented and regular. Expected product data for the coming year are given below. Overhead costs are identified by activity.

	Scented Cards	Regular Cards	Total
Units produced	20,000	200,000	-
Prime costs	$160,000	$1,500,000	$1,660,000
Direct labor hours	20,000	160,000	180,000
Number of setups	60	40	100
Machine hours	10,000	80,000	90,000
Inspection hours	2,000	16,000	18,000
Number of moves	180	120	300

Overhead costs:

Setting up equipment	$240,000
Moving materials	120,000
Machining	200,000
Inspecting products	160,000

Required:

Answer the following questions:

Calculate the activity consumption ratios for Scented cards (round to two decimal places).

Setups:
Moving materials:
Machining:
Inspection:

If only one rate based on direct labor hours were used to assign overhead, Scented Cards would receive about ________ percent of the total overhead. Upon comparing this overhead assignment with the activity consumption ratios calculated in part a, it is clear that a plantwide rate would the activity-based cost assignments.

Calculate the four activity rates (round to the nearest cent).

Setups:		per setup
Moving materials:		per move
Machining:		per machine hour
Inspection:		per inspection hour

Calculate the total unit costs using activity rates to assign overhead (round to the nearest cent).

Scented:
Regular:

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