Sheffield Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following information. Car Truck Estimated wheels produced 45,000 9,000 Direct labor hours per wheel 1 3 Total estimated overhead costs for the two product lines are $835,200. Calculate overhead rate. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rate $ per direct labor hour Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs. Car wheels $ Truck wheels $ Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the truck wheels product line because of its complexity. He therefore develops the following three activity cost pools and related cost drivers to better understand these costs. Activity Cost Pools Estimated Use of Cost Drivers Estimated Overhead Costs Setting up machines 1,000 setups $216,000 Assembling 72,000 labor hours 360,000 Inspection 1,200 inspections 259,200 Compute the activity-based overhead rates for these three cost pools. Overhead Rates Setting up machines $ Assembling $ Inspection $ Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based costing system, given the following information. Estimated Use of Cost Drivers per Product Car Truck Number of setups 200 800 Direct labor hours 45,000 27,000 Number of inspections 100 1,100 Car Wheels Truck Wheels Setting up machines $ $ Assembling $ $ Inspection $ $ Total cost assigned $ $
Sheffield Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following information. Car Truck Estimated wheels produced 45,000 9,000 Direct labor hours per wheel 1 3 Total estimated overhead costs for the two product lines are $835,200. Calculate overhead rate. (Round answer to 2 decimal places, e.g. 12.25.) Overhead rate $ per direct labor hour Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs. Car wheels $ Truck wheels $ Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the truck wheels product line because of its complexity. He therefore develops the following three activity cost pools and related cost drivers to better understand these costs. Activity Cost Pools Estimated Use of Cost Drivers Estimated Overhead Costs Setting up machines 1,000 setups $216,000 Assembling 72,000 labor hours 360,000 Inspection 1,200 inspections 259,200 Compute the activity-based overhead rates for these three cost pools. Overhead Rates Setting up machines $ Assembling $ Inspection $ Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based costing system, given the following information. Estimated Use of Cost Drivers per Product Car Truck Number of setups 200 800 Direct labor hours 45,000 27,000 Number of inspections 100 1,100 Car Wheels Truck Wheels Setting up machines $ $ Assembling $ $ Inspection $ $ Total cost assigned $ $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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Sheffield Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following information.
Total estimated overhead costs for the two product lines are $835,200.
|
Car
|
Truck
|
|||
| Estimated wheels produced | 45,000 | 9,000 | ||
| Direct labor hours per wheel | 1 | 3 |
Total estimated overhead costs for the two product lines are $835,200.
Calculate overhead rate. (Round answer to 2 decimal places, e.g. 12.25.)
| Overhead rate |
$
|
per direct labor hour |
Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hours is used to allocate overhead costs.
| Car wheels |
$
|
|
| Truck wheels |
$
|
Hermann is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the truck wheels product line because of its complexity. He therefore develops the following three activity cost pools and related cost drivers to better understand these costs.
Compute the activity-based overhead rates for these three cost pools.
|
Activity Cost Pools
|
Estimated Use of
Cost Drivers |
Estimated Overhead
Costs |
|||
| Setting up machines | 1,000 | setups | $216,000 | ||
| Assembling | 72,000 | labor hours | 360,000 | ||
| Inspection | 1,200 | inspections | 259,200 |
Compute the activity-based overhead rates for these three cost pools.
|
Overhead Rates
|
||
| Setting up machines |
$
|
|
| Assembling |
$
|
|
| Inspection |
$
|
Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based costing system, given the following information.
|
Estimated Use of Cost Drivers per Product
|
||||
|
Car
|
Truck
|
|||
| Number of setups | 200 | 800 | ||
| Direct labor hours | 45,000 | 27,000 | ||
| Number of inspections | 100 | 1,100 |
|
Car Wheels
|
Truck Wheels
|
|||
| Setting up machines |
$
|
$
|
||
| Assembling |
$
|
$
|
||
| Inspection |
$
|
$
|
||
| Total cost assigned |
$
|
$
|
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