Sunland Toys & Games, Inc. manufactures specialty toys. Sunland uses a traditional product costing system to assign overhead costs uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys, Sunland assigns its quality-control overhead costs to all products at a rate of 21% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is $325,000. In response to repeated requests from its financial vice president, Sunland's management agrees to adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follows: Activity Cost Pools Materials Inspection Assembly Line Inspection National Toy Association Certification (a) Traditional costing Activity-based costing Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional product costing system (direct labor is the cost driver), and (2) using activity-based costing. Cost Drivers Number of pounds Number of finished toys Retail orders Quality-Control Overhead Cost $ $ Overhead Rate $0.70 per pound $0.14 per toy $2.00 per order Number of Cost Drivers Used per Activity 60,000 pounds 167,000 toys 900 orders

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Topic Video
Question
100%
Sunland Toys & Games, Inc. manufactures specialty toys. Sunland uses a traditional product costing system to assign overhead costs
uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys, Sunland assigns its
quality-control overhead costs to all products at a rate of 21% of direct labor costs. Its direct labor cost for the month of August for its
toddler line of toys is $325,000. In response to repeated requests from its financial vice president, Sunland's management agrees to
adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follows:
Activity Cost Pools
Materials Inspection
Assembly Line Inspection
National Toy Association Certification
(a)
Traditional costing
Activity-based costing
Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional
product costing system (direct labor is the cost driver), and (2) using activity-based costing.
Quality-Control Overhead Cost
$
Cost Drivers
Number of pounds
Number of finished toys
Retail orders
+A
$
Overhead
Rate
$0.70 per pound
$0.14 per toy
$2.00 per order
Number of Cost
Drivers Used
per Activity
60,000 pounds
167,000 toys
900 orders
Transcribed Image Text:Sunland Toys & Games, Inc. manufactures specialty toys. Sunland uses a traditional product costing system to assign overhead costs uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys, Sunland assigns its quality-control overhead costs to all products at a rate of 21% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is $325,000. In response to repeated requests from its financial vice president, Sunland's management agrees to adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follows: Activity Cost Pools Materials Inspection Assembly Line Inspection National Toy Association Certification (a) Traditional costing Activity-based costing Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional product costing system (direct labor is the cost driver), and (2) using activity-based costing. Quality-Control Overhead Cost $ Cost Drivers Number of pounds Number of finished toys Retail orders +A $ Overhead Rate $0.70 per pound $0.14 per toy $2.00 per order Number of Cost Drivers Used per Activity 60,000 pounds 167,000 toys 900 orders
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question

See image below. Need to computer the overhear cost assigned to the toddler topy line for the month of August using activity-based costing under the new propoal. Also need confirm if Sunland Toys should accept the Nation Toy Association's offer?

Sunland Toys is exploring options to help reduce overhead costs especially for non-value added activities. One of the proposals is
from the National Toy Association. For an additional $1 per order, this entity could perform additional safety checks that would
reduce the assembly line inspection costs by $0.01 per toy. Compute the overhead cost assigned to the toddler toy line for the
month of August using activity-based costing under this proposal.
Overhead cost assigned $
Should Sunland Toys accept the National Toy Association's offer?
Sunland Toys
accept this offer.
Transcribed Image Text:Sunland Toys is exploring options to help reduce overhead costs especially for non-value added activities. One of the proposals is from the National Toy Association. For an additional $1 per order, this entity could perform additional safety checks that would reduce the assembly line inspection costs by $0.01 per toy. Compute the overhead cost assigned to the toddler toy line for the month of August using activity-based costing under this proposal. Overhead cost assigned $ Should Sunland Toys accept the National Toy Association's offer? Sunland Toys accept this offer.
Solution
Bartleby Expert
SEE SOLUTION
Knowledge Booster
Costing Systems
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education