### Text Transcription and Explanation#### OverviewIn its first year of operations, a company produced and sold 70,000 units of Product A at a selling price of $20 per unit and 17,500 units of Product B at a selling price of $40 per unit. Additional information related to the company's only two products is shown below:#### Cost Information| Category | Product A | Product B | Total ||--------------------------|-----------|-----------|----------|| Direct materials | $436,300 | $249,500 | $685,800 || Direct labor | $200,000 | $104,000 | $304,000 || Manufacturing overhead | $608,000 || **Cost of goods sold** | **$1,597,800** |#### Activity-Based Costing SystemThe company created an activity-based costing system that allocated its manufacturing overhead costs to four activities as follows:| Activity Cost Pool (and Activity Measure) | Overhead | Product A | Product B | Total ||-------------------------------------------|----------|-----------|-----------|----------|| Machining (machine-hours) | $213,500 | 90,000 | 62,500 | 152,500 || Setups (setup hours) | $157,500 | 75 | 300 | 375 || Product design (number of products) | $120,000 | 1 | 1 | 2 || Other (organization-sustaining costs) | $117,000 | NA | NA | NA || **Total manufacturing overhead cost** | **$608,000** |#### AnalysisThe company's ABC (Activity-Based Costing) implementation team also concluded that $50,000 and $100,000 of the company’s advertising expenses could be directly traced to Product A and Product B, respectively. The remainder of its selling and administrative expenses ($400,000) was organization-sustaining in nature.#### QuestionIf the company uses a traditional cost system that relies on plant-wide overhead allocation based on direct labor dollars, what is the total gross margin (or product margin) earned by Product B? ### Explanation of Data- **Direct Materials and Labor**: These are the direct costs associated with each product, summing up to

Solution: Manufacturing Overhead 608000 / Estiametd total direct labor dollars 304000…

selling price of $40 per unit. Additional information relating to the company's only two products is shown below: Product A Product B Total $ 436,300 $ 249,500 $ 200,000 $ 104,000 $ 685,800 304,000 608,000 Direct materials Direct labor Manufacturing overhead $ 1,597,800 Cost of goods sold The company created an activity-based costing system that allocated its manufacturing overhead costs to four activities as follows: Manufacturing Activity Product A Product B Total Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Overhead 152,500 375 62,500 $ 213,500 157,500 90,000 75 300 120 000

selling price of $40 per unit. Additional information relating to the company's only two products is shown below: Product A Product B Total $ 436,300 $ 249,500 $ 200,000 $ 104,000 $ 685,800 304,000 608,000 Direct materials Direct labor Manufacturing overhead $ 1,597,800 Cost of goods sold The company created an activity-based costing system that allocated its manufacturing overhead costs to four activities as follows: Manufacturing Activity Product A Product B Total Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Overhead 152,500 375 62,500 $ 213,500 157,500 90,000 75 300 120 000

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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Assume a company manufactures only two products-14,000 units of Product G and 6,000 units of Product H. 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 G and H: Activity Cost Pool Machining Machine setups Product design Activity Measure Machine-hours Number of setups Number of products Activity Measure Machine-hours Number of setups Number of products Product G Product H 9,000 50 1 6,000 150 1 Estimated Overhead Cost Expected Activity 15,000 MH 200 Setups $ 300,000 $ 150,000 $ 78,000 2 Products Using the ABC system, how much total overhead cost would be assigned from all of the activities to Product H?
Presented below are certain operating data for the four departments of Tally Manufacturing Company. Service Production 1 2 1 2 Total manufacturing overhead costs either identifiable with or allocated to each department $72,000 $86,400 $108,000 $117,600 Square feet of factory floor space 48,000 96,000 Number of factory workers 110 70 Planned direct labor hours for the year 24,000 36,000 Allocate, to the two production departments, the costs of service departments 1 and 2, using factory floor space and number of workers, respectively, as bases. Do not round bases when calculating reallocations of service departments. Production 1 2 Identifiable and allocated overhead Answer Answer Reallocation of service departments: Dept. 1 Factory floor space Answer Answer Dept. 2 Number of factory workers Answer Answer Total manufacturing overhead Answer Answer What is the apparent…
The following is taken from Clausen Company's internal records of its factory with two operating departments. The cost driver for indirect labor is direct labor hours, and the cost driver for the remaining items is number of hours of machine use. Compute the total amount of rent and utilities allocated to Dept. 2 using activity-based costing. Direct LaborHours MachineHours Operating Dept. 1 864 9,300 Operating Dept. 2 2,016 6,200 Totals 2,880 15,500 Factory overhead costs Rent and utilities $ 20,700 Indirect labor 16,300 Depreciation – Equipment 13,000 Total factory overhead $ 50,000
Helm Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: Costs: Manufacturing overhead Selling and administrative expenses Total Distribution of resource consumption: Manufacturing overhead Selling and administrative expenses $304,500 $493,000 Activity Cost Pools Customer Support 85% 20% O $116,000 O $428,000 Order Size 5% 60% S S Other 10% 20% The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools. How much cost, in total, would be allocated in the first-stage allocation to the Customer Support activity cost 480,000 100,000 580,000 Total 100% 100%
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Overhead costs: Equipment depreciation $ 91,000 Supervisory expense $ 12,300 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Machining Order Filling Other Equipment depreciation 0.60 0.30 0.10 Supervisory expense 0.60 0.20 0.20 In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity: MHs (Machining) Orders (Order Filling) Product W1 6,050 198 Product M0 21,800 999 Total…
Larner Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Labor-related Machine-related Machine setups Production orders. Shipments General factory Activity Rates $ 7.00 per direct labor-hour $ 4.00 per machine-hour $50.00 per setup $ 100.00 per order $ 150.00 per shipment $ 4.00 per direct labor-hour Cost and activity data have been supplied for the following products: Direct materials cost per unit Direct labor cost per unit 378 $ 3.00 $ 3.00 B52 $ 20.00 $ 6.00 2,000 100 Number of units produced per year Total Expected Activity 378 B52 Direct labor-hours. 1,000 20 Machine-hours 2,000 50 Machine setups 6 3 Production orders 5 3 8 3 Shipments Required: Compute the unit product cost of each product listed above. (Do not round intermediate calculations. Round your answers to 2 decimal places.) J78 B52 Unit product cost
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A Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $12,100; Order Filling, $16,800; and Other, $13,500. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:ICO/4243 0 MHS (Machining) 5,800 4,200 Product P17 Product V29 Q. What is the overhead cost assigned to Product P17 under activity-based costing? Answer. (Click to select) (Click to select) None of the answers are correct. $10,122 $12,058 $16,842 $18,778 Orders (Order Filling) 300 700
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