Smithson, Inc. decided to implement the activity-based costing approach and was quite successful in its use. However, the controller is wondering if instead of only two activity cost pools, they should expand to three activity cost pools based on the following: Direct labor costs Machine hours Setup hours Packaging hours Machining Machine set up Packaging Family Model $76,200 2,000 200 The estimated overhead of $457,200 is allocated as follows: machining activity cost pool $243,840, machine set up $172,720 and packaging $40,640. S 50 Determine the overhead rates using the activity-based costing approach with three cost pools. (Round answers to 2 decimal places, eg. 15.25.) $ Deluxe Model $152,400 2,000 800 75 Overhead Rate 60.96 per hour 172.72 per hour 325.12 per hour

Smithson, Inc. decided to implement the activity-based costing approach and was quite successful in its use. However, the controller is wondering if instead of only two activity cost pools, they should expand to three activity cost pools based on the following: Direct labor costs Machine hours Setup hours Packaging hours Machining Machine set up Packaging Family Model $76,200 2,000 200 The estimated overhead of $457,200 is allocated as follows: machining activity cost pool $243,840, machine set up $172,720 and packaging $40,640. S 50 Determine the overhead rates using the activity-based costing approach with three cost pools. (Round answers to 2 decimal places, eg. 15.25.) $ Deluxe Model $152,400 2,000 800 75 Overhead Rate 60.96 per hour 172.72 per hour 325.12 per hour

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 7CE

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Please do not give solution in image format thanku

Smithson, Inc. decided to implement the activity-based costing approach and was quite successful in its use. However, the
controller is wondering if instead of only two activity cost pools, they should expand to three activity cost pools based on the
following:
4
Direct labor costs
Machine hours
Setup hours
Packaging hours
Machining
Machine set up
Packaging
Family Model
$76,200
2,000
$
200
$
50
Deluxe Model
The estimated overhead of $457,200 is allocated as follows: machining activity cost pool $243,840, machine set up $172,720 and
packaging $40,640.
$152,400
Determine the overhead rates using the activity-based costing approach with three cost pools. (Round answers to 2 decimal places,
eg. 15.25.)
2,000
Overhead Rate
800
75
325.12
60.96 per hour
172.72 per hour
per hour

Determine the overhead allocation for the family model and the deluxe model using three activity cost pools.
Family model $
Deluxe model $
What is the difference in allocation between two activity cost pools and three activity cost pools? Is the difference in allocation
worth using the third activity cost pool?
Difference
Oerhead Allocation
$
Save for Later
The additional cost pool
does not benefit
benefit
the overhead cost allocation significantly.
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Open MFG2 and click the Chart sheet tab. The management of Twisp is convinced that the quality of its products is highly dependent on their relative labor costs. Experience has shown that direct labor should account for at least 45% of the total product cost. According to the pie chart that appears on the screen, Twisp did not achieve this goal in 2011. How much should Twisp have spent on direct labor to reach its 45% goal? To find out, try different values for direct labor (cell C8), clicking the Chart sheet tab after each attempt. When you find a direct labor level that increases the direct labor percentage to 45%, enter the answer in the space provided: In 2011, direct labor needed to be ________________. Open MFG3 and click the Chart sheet tab. Did Twisp achieve its 45% goal in 2012? If not, answer the following: In 2012, direct labor needed to be ________________. When the assignment is complete, close the files without saving them again. Worksheet. The MFG2 worksheet presents the companys manufacturing activities for 2011. The company also had the following selling and general activities in 2011: sales of 13,503,000, selling expenses of 2,400,000, and general expenses of 1,200,000. Modify the worksheet to include this information in the Data Section and change the Answer Section so that it is in the form of an income statement. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as MFGT. Hint: Expand the Data Section to include these additional input items alphabetically. Insert a row for sales under the heading in the Answer Section. Add the rest of the income statement information to the bottom of the schedule. You will need to enter formulas for gross profit, all the expenses, and net income. You will also need to change the statement name. Chart. Using the MFG2 file, prepare a single 3-D bar chart to show the dollar amount of materials, labor, and overhead incurred by Twisp in 2011 and 2012. Complete the Chart Data Table and use it as a basis for preparing the chart. Enter all appropriate titles, legends, and formats. Enter your name somewhere on the chart. Save the file again as MFG2. Print the chart.
The management of Hartman Company is trying to determine the amount of each of two products to produce over the coming planning period. The following information concerns labor availability, labor utilization, and product profitability: a. Develop a linear programming model of the Hartman Company problem. Solve the model to determine the optimal production quantities of products 1 and 2. b. In computing the profit contribution per unit, management does not deduct labor costs because they are considered fixed for the upcoming planning period. However, suppose that overtime can be scheduled in some of the departments. Which departments would you recommend scheduling for overtime? How much would you be willing to pay per hour of overtime in each department? c. Suppose that 10, 6, and 8 hours of overtime may be scheduled in departments A, B, and C, respectively. The cost per hour of overtime is 18 in department A, 22.50 in department B, and 12 in department C. Formulate a linear programming model that can be used to determine the optimal production quantities if overtime is made available. What are the optimal production quantities, and what is the revised total contribution to profit? How much overtime do you recommend using in each department? What is the increase in the total contribution to profit if overtime is used?
ng Enabled: Assignment 2 i Saved Siegel Corporation manufactures a product available in both a deluxe and a regular model. The company has made the regular model for years; the deluxe model was introduced several years ago to capture a new segment of the market. Since the introduction of the deluxe model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the deluxe model have been increasing rapidly. 3:56 Overhead is applied to products on the basis of direct labour-hours. At the beginning of the current year, management estimated that $2,610,400 in overhead costs would be incurred and the company would produce and sell 15,000 units of the deluxe model and 63,616 units of the regular model. The deluxe model requires 2.8 hours of direct labour time per unit, and the regular model requires 1.5 hours. Materials and labour costs follow: Direct materials cost per unit Deluxe $195 22 Regular $99 16 Direct…
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Curiumber Enterprises is considering manufacturing a new product. It projects the cost of direct materials and rent for a range or output as follows. Output in Units 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Rent Cost 11.000 $5,290 5,290 8,464 8,464 8,464 8,464. 8,464 8.464 10.580 10,000 10,580 10.580 Direct Materials $4,200 7,200 7,200 9,600. 12,000 14,400 16.800 19,200 30.999 37,030 46.552
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O UIMWiFi > Login O Sci-Hub: removing. Oth Costing Saved Help Save & Ex Strzelecki Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Service Department A and Service Department B, and two operating departments, Operating Department X and Operating Department Y. Data concerning those departments follow: Service Departments Operating Departments Operating Service Service Operating Department A Department B $ 43,000 Department X Department Y $ 31,000 $ 251,800 $ 311,700 Departmental costs Allocation base A 4,900 2,000 26,000 12,e00 Allocation base B 6,000 2,000 32, еее 4,000 Service Department A costs are allocated first on the basis of allocation base A and Service Department B costs are allocated second on the basis of allocation base B. The total Operating Department Y cost after allocations is closest to: Multiple Choice $321,000 ENG