### Overhead Assignment Analysis for Swifty Corporation's Product LinesSwifty Corporation manufactures safes—specifically, large mobile safes and large walk-in stationary bank safes. As part of its annual budgeting process, Swifty is analyzing the profitability of its two products. An essential part of this analysis involves estimating the overhead assigned to each product line. The data provided below pertains to overhead allocation.#### Product Line Information| | Mobile Safes | Walk-in Safes ||---------------------|--------------|---------------|| **Units planned for production** | 200 | 50 || **Material moves per product line** | 300 | 200 || **Purchase orders per product line** | 450 | 350 || **Direct labor hours per product line** | 800 | 1,700 |#### Part (a)The total estimated manufacturing overhead was $260,000. Using traditional costing (which assigns overhead based on direct labor hours), the following amounts of overhead costs are assigned:1. **One mobile safe**: $416 per unit2. **One walk-in safe**: $3,536 per unit#### Part (b1)The total estimated manufacturing overhead of $260,000 comprises $160,000 for materials handling costs and $100,000 for purchasing activity costs. Using activity-based costing (ABC), the overhead costs assigned are:1. **Materials Handling Costs**: - **One mobile safe**: $480 each - **One walk-in safe**: $1,280 each### Explanation of Calculations- **Traditional Costing**: Allocates overhead costs using direct labor hours. This method calculates the overhead per unit by dividing the total overhead assigned to the product line by the number of units produced.- **Activity-Based Costing (ABC)**: Allocates overhead costs based on specific activities that generate costs. In this case, materials handling costs and purchasing activity costs are considered.### Understanding Graphs and DiagramsWhile not present in the text, visual representations typically include bar charts or pie charts to portray overhead costs per unit and comparisons between traditional costing versus ABC. For better comprehension, a detailed explanation of the allocation basis and its impact on unit costs is beneficial.#### NoteThis exercise illustrates the significant differences between traditional costing and ABC in accurately distributing overhead costs, thereby enhancing cost management and product pricing strategies. ### Activity-Based Costing (ABC) ExerciseThe total estimated manufacturing overhead of $260,000 was comprised of $160,000 for materials handling costs and $100,000 for purchasing activity costs. Under activity-based costing (ABC):**(Note: Round answers to 2 decimal places, e.g. 12.25)****Question:**What amount of purchasing activity costs are assigned to:(a) One mobile safe: $\_\_\_\_\_\_ each(b) One walk-in safe: $\_\_\_\_\_\_ each

Activity-based costing is a costing approach in which a company's activities are identified and the…

The total estimated manufacturing overhead of $260,000 was comprised of $160,000 for materials handling costs and $100,000 for purchasing activity costs. Under activity-based costing (ABC): (Round answers to 2 decimal places, e.g. 12.25.) What amount of purchasing activity costs are assigned to: (a) (b) One mobile safe One walk-in safe $ $ each each

The total estimated manufacturing overhead of $260,000 was comprised of $160,000 for materials handling costs and $100,000 for purchasing activity costs. Under activity-based costing (ABC): (Round answers to 2 decimal places, e.g. 12.25.) What amount of purchasing activity costs are assigned to: (a) (b) One mobile safe One walk-in safe $ $ each each

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter4: Job-order Costing And Overhead Application

Section: Chapter Questions

Problem 57P: Overhead Rates, Unit Costs Folsom Company manufactures specialty tools to customer order. There are...

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Using job order costing in a service company Chance Realtors, a real estate consulting firm, specializes in advising companies on potential new plant sites. The company uses a job order costing system with a predetermined overhead allocation rate, computed as a percentage of direct labor costs. At the beginning of 2018, managing partner Andrew Chance prepared the following budget for the year: Maynard Manufacturing, Inc. is inviting several consultants to bid for work. Andrew Chance wants to submit a bid. He estimates that this job will require about 180 direct labor hours. Requirements Compute Chance Realtors’ (a) hourly direct labor cost rate and predetermined overhead allocation rate. Compute the predicted cost of the Maynard Manufacturing job. If Chance wants to earn a profit that equals 25% of the job’s cost, how much should he bid for the Maynard Manufacturing job?
Overhead Rates, Unit Costs Folsom Company manufactures specialty tools to customer order. There are three producing departments. Departmental information on budgeted overhead and various activity measures for the coming year is as follows: Currently, overhead is applied on the basis of machine hours using a plantwide rate. However, Janine, the controller, has been wondering whether it might be worthwhile to use departmental overhead rates. She has analyzed the overhead costs and drivers for the various departments and decided that Welding and Finishing should base their overhead rates on machine hours and that Assembly should base its overhead rate on direct labor hours. Janine has been asked to prepare bids for two jobs with the following information: The typical bid price includes a 35% markup over full manufacturing cost. Round all overhead rates to the nearest cent. Round all bid prices to the nearest dollar. Required: 1. Calculate a plantwide rate for Folsom Company based on machine hours. What is the bid price of each job using this rate? 2. Calculate departmental overhead rates for the producing departments. What is the bid price of each job using these rates?
Bumblebee Mobiles manufactures a line of cell phones. The management has identified the following overhead costs and related cost drivers for the coming year. The following were incurred in manufacturing two of their cell phones, Bubble and Burst, during the first quarter. REQUIREMENT Review the worksheet called ABC that follows these requirements. You have been asked to determine the cost of each product using an activity-based cost system. Note that the problem information is already entered into the Data Section of the ABC worksheet.
Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is: Previously, Sanjay Bhatt, Firenza Companys controller, had applied overhead on the basis of machine hours. Expected machine hours for the coming year are 50,000. Sanjay has been reading about activity-based costing, and he wonders whether or not it might offer some advantages to his company. He decided that appropriate drivers for overhead activities are purchase orders for purchasing, number of setups for setup cost, engineering hours for engineering cost, and machine hours for other. Budgeted amounts for these drivers are 5,000 purchase orders, 500 setups, and 2,500 engineering hours. Sanjay has been asked to prepare bids for two jobs with the following information: The typical bid price includes a 40 percent markup over full manufacturing cost. Required: 1. Calculate a plantwide rate for Firenza Company based on machine hours. What is the bid price of each job using this rate? 2. Calculate activity rates for the four overhead activities. What is the bid price of each job using these rates? 3. Which bids are more accurate? Why?
(Appendix 3A) Method of Least Squares Using Computer Spreadsheet Program The controller for Beckham Company believes that the number of direct labor hours is associated with overhead cost. He collected the following data on the number of direct labor hours and associated factory overhead cost for the months of January through August. Required: 1. Using a computer spreadsheet program such as Excel, run a regression on these data. Print out your results. 2. Using your results from Requirement 1, write the cost formula for overhead cost. (Note: Round the fixed cost to the nearest dollar and the variable rate to the nearest cent.) 3. CONCEPTUAL CONNECTION What is R2 based on your results? Do you think that the number of direct labor hours is a good predictor of factory overhead cost? 4. Assuming that expected September direct labor hours are 700, what is expected factory overhead cost using the cost formula in Requirement 2?
Objective: Consider that you are an analyst at Regeneron Pharmaceuticals. You need to decide how to allocate administrative overhead costs to Regeneron's main commercial products (Eylea, Dupixent, Kevzara and Praluent). Determine how to appropriately allocate the costs in the table below to each of the commercial products using an allocation methodology of your choice. Department2019 Annual Operating ExpenseTime spent supporting Commercial productsCommercial$200MM100%IT$100MM25%Facilities$150MM0%Finance$25MM20%Human Resources$75MM10% Use the supporting document Net Product Sales of REGN Products to facilitate your analysis. Provide a written summary of how you allocated the overhead costs to each product in an outline of no more than one page. As a starting point, it's recommended that you revisit the material we covered in Chapter 12. Guidance on calculations:Start off with Net Product Sales of REGN Products. Your objective pertains to 2019 expenses, so you should be reviewing 2019…
< Multiple Versus Single Overhead Rates, Activity Drivers Deoro Company has identified the following overhead activities, costs, and activity drivers for the coming year: Expected Cost Activity Driver Activity Capacity Number of setups Number of orders Activity Setting up equipment Ordering costs Machine costs Receiving Receiving hours Deoro produces two models of dishwashers with the following expected prime costs and activity demands: Direct materials Direct labor Units completed Direct labor hours Number of setups Number of orders Machine hours Receiving hours $464,550 Required: 336,300 747,000 424,200 Model A Machine hours $604,000 498,000 17,000 5,800 410 Model B $804,000 456,000 8,700 1,500 6,200 23,500 3,800 The company's normal activity is 7,300 direct labor hours. 160 11,500 18,000 6,300 570 17,700 41,500 10,100 1. Determine the unit cost for each model using direct labor hours to apply overhead. Round intermediate calculations and final answers to nearest cent.
Computing product costs in an activity-based costing system Franklin, Inc. uses activity-based costing to account for its chrome bumper manufacturing process. Company managers hate identified four manufacturing activities: materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for 2018 and their allocation bases are as follows Franklin expects to produce 500 chrome bumpers during the year. The bumpers are expected to use 4,000 parts, require 10 setups, and consume 1,000 hours of finishing time. Requirements Compute the predetermined overhead allocation rate for each activity. Compute the expected indirect manufacturing cost of each bumper.
Computing product costs in an activity-based costing system Turbo Champs Corp. uses activity-based costing to account for its motorcycle manufacturing process. Company managers have identified three supporting manufacturing activities: inspection, machine setup, and machine maintenance. The budgeted activity costs for 2018 and their allocation bases are as follows: Turbo Champs expects to produce 20 custom-built motorcycles for the year. The motorcycles are expected to require 100 inspections, 40 setups, and 100 machine hours. Requirements Compute the predetermined overhead allocation rate for each activity. Compute the expected indirect manufacturing cost of each motorcycle.
Problem 18: Predetermined Factory Overhead believes that the company would be better if it will use two factory overhead single factory overhead rate that is based on machine hours. Its manager Davao Corp. uses job order costing system to produce its products. It uses a rates, one based on material costs and the other one is based machine hours. The following data are for year 2020: Materials related Factory overhead Machine related Factory overhead Total Budgeted Factory overhead Costs of materials used on jobs Total Machine hours Data related to three jobs worked on in December follow: Material Costs Direct Labor Costs Machine Hours used Job # 1 168,000 128,000 68,000 Budgeted FOH 3,840,000 10,400,000 14,240,000 Job # 2 656,000 104,000 36,000 Job Order Costing 12,800,000 1,600,000 Job # 3 312,000 144,000 23,200 Actual factory overhead related to materials was P318,400 and actual factory overhead related to machine hours was P846,400. Required: 1. Determine the predetermine factory…
es Required information [The following information applies to the questions displayed below.] Arctica manufactures snowmobiles and ATVs. These products are made in different departments, and each department has its own manager. Each responsibility performance report includes only those costs that the department manager can control: direct materials, direct labor, supplies used, and utilities. For Year Ended December 31 Direct materials Direct labor Department manager salaries Supplies used Utilities Rent Totals Totals Controllable Costs Totals Budget Snowmobile $ 20,370 11,300 5,200 4,290 450 6,600 $ 48,210 Prepare a responsibility accounting performance report for the snowmobile department. Note: Under budget amounts should be indicated by a minus sign. $ Responsibility Accounting Performance Report Manager, Snowmobile Department For Year Ended December 31 Budgeted Controllable Costs ATV $ 28,400 21,400 6,100 990 630 7,200 $ 64,720 0 $ Snowmobile $ 20,320 11,650 5,300 4,070 420 6,200…
Multiple Versus Single Overhead Rates, Activity Drivers Deoro Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity Expected Cost Activity Driver Activity Capacity Setting up equipment $481,900 Number of setups 610 Ordering costs 457,700 Number of orders 19,900 Machine costs 702,100 Machine hours 41,300 Receiving 445,500 Receiving hours 9,900 Deoro produces two models of dishwashers with the following expected prime costs and activity demands: Model A Model B Direct materials $560,000 $781,000 Direct labor 490,000 481,000 Units completed 16,400 7,700 Direct labor hours 5,400 2,000 Number of setups 370 240 Number of orders 7,000 12,900 Machine hours 23,900 17,400 Receiving hours 3,100 6,800 The company's normal activity is 7,400 direct labor hours. Required: 1. Determine the unit cost for each model using direct labor hours to apply overhead. Round intermediate calculations and final…