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Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,500,000 Pro $2,400,000 Direct material Direct labor Assembly Packaging Total direct labor Direct costs Overhead Assembly building Assembling (@ $30 per MH) Setting up machine (@ $900 per setup hour) Handling material (@ $3, 000 per run) Packaging building Inspecting and packing (@ $5_per direct labor-hour) Shipping (@ $1,320 per shipment) Total ABC overhead $ 750,000 990,000 $1,740,000 $3,240,000 600,000 360,000 $ 960,000 $3,360,000 $ $ 180,000 36,000 24,000 $ 900,000 360,000 120,000 300,000 132,000 $ 672,000 114,000 264,000 $1,758,000 $5,118,000 40,000 $ Total ABC cost $3,912,000 100,000 Number of units Unit cost $ 39.12 127.95 Required: a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900. Total ABC Model Overhead Sport Pro

Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,500,000 Pro $2,400,000 Direct material Direct labor Assembly Packaging Total direct labor Direct costs Overhead Assembly building Assembling (@ $30 per MH) Setting up machine (@ $900 per setup hour) Handling material (@ $3, 000 per run) Packaging building Inspecting and packing (@ $5_per direct labor-hour) Shipping (@ $1,320 per shipment) Total ABC overhead $ 750,000 990,000 $1,740,000 $3,240,000 600,000 360,000 $ 960,000 $3,360,000 $ $ 180,000 36,000 24,000 $ 900,000 360,000 120,000 300,000 132,000 $ 672,000 114,000 264,000 $1,758,000 $5,118,000 40,000 $ Total ABC cost $3,912,000 100,000 Number of units Unit cost $ 39.12 127.95 Required: a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900. Total ABC Model Overhead Sport Pro

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 100,000 units of the Sport model and 40,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 25 percent. **Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility** | Activity | Cost Driver | Cost Driver Volume | |------------------------|------------------------|---------------------| | | | Sport | Pro | Total | |------------------------|------------------------|-------|------|-------| | **Assembly building** | | | | | | Assembling | Machine-hours | 6,000 | 30,000 | 36,000 | | Setting up machines | Setup hours | 40 | 400 | 440 | | Handling material | Production runs | 8 | 40 | 48 | | **Packaging building** | | | | | | Inspecting and packing | Direct labor-hours | 60,000| 22,800| 82,800| | Shipping | Number of shipments | 100 | 200 | 300 | This table outlines various activities at the CenterPoint Manufacturing Facility and the associated cost drivers and their volumes for the Sport and Pro models. Each activity uses a specific measure as a cost driver, such as machine-hours, setup hours, production runs, direct labor-hours, and the number of shipments.
Transcribed Image Text:After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 100,000 units of the Sport model and 40,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 25 percent. **Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility** | Activity | Cost Driver | Cost Driver Volume | |------------------------|------------------------|---------------------| | | | Sport | Pro | Total | |------------------------|------------------------|-------|------|-------| | **Assembly building** | | | | | | Assembling | Machine-hours | 6,000 | 30,000 | 36,000 | | Setting up machines | Setup hours | 40 | 400 | 440 | | Handling material | Production runs | 8 | 40 | 48 | | **Packaging building** | | | | | | Inspecting and packing | Direct labor-hours | 60,000| 22,800| 82,800| | Shipping | Number of shipments | 100 | 200 | 300 | This table outlines various activities at the CenterPoint Manufacturing Facility and the associated cost drivers and their volumes for the Sport and Pro models. Each activity uses a specific measure as a cost driver, such as machine-hours, setup hours, production runs, direct labor-hours, and the number of shipments.
**Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility** | | Sport | Pro | |----------------------|---------------|---------------| | **Direct material** | $1,500,000 | $2,400,000 | | **Direct labor** | | | | Assembly | $750,000 | $600,000 | | Packaging | $990,000 | $360,000 | | **Total direct labor** | $1,740,000 | $960,000 | | **Direct costs** | $3,240,000 | $3,360,000 | | **Overhead** | | | | **Assembly building**| | | | Assembling (@ $30 per MH) | $180,000 | $900,000 | | Setting up machine (@ $900 per setup hour) | $36,000 | $360,000 | | Handling material (@ $3,000 per run) | $24,000 | $120,000 | | **Packaging building** | | | | Inspecting and packing (@ $5 per direct labor-hour) | $300,000 | $114,000 | | Shipping (@ $1,320 per shipment) | $132,000 | $264,000 | | **Total ABC overhead** | $672,000 | $1,758,000 | | **Total ABC cost** | $3,912,000 | $5,118,000 | | **Number of units** | 100,000 | 40,000 | | **Unit cost** | $39.12 | $127.95 | **Required:** **a.** Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900. | **Model** | **Total ABC Overhead** | |-----------|------------------------| | Sport | | | Pro | | **Explanation of Overhead Allocation** - **Assembly Building Overhead:** - Assembling is charged at $30 per machine hour (MH). -
Transcribed Image Text:**Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility** | | Sport | Pro | |----------------------|---------------|---------------| | **Direct material** | $1,500,000 | $2,400,000 | | **Direct labor** | | | | Assembly | $750,000 | $600,000 | | Packaging | $990,000 | $360,000 | | **Total direct labor** | $1,740,000 | $960,000 | | **Direct costs** | $3,240,000 | $3,360,000 | | **Overhead** | | | | **Assembly building**| | | | Assembling (@ $30 per MH) | $180,000 | $900,000 | | Setting up machine (@ $900 per setup hour) | $36,000 | $360,000 | | Handling material (@ $3,000 per run) | $24,000 | $120,000 | | **Packaging building** | | | | Inspecting and packing (@ $5 per direct labor-hour) | $300,000 | $114,000 | | Shipping (@ $1,320 per shipment) | $132,000 | $264,000 | | **Total ABC overhead** | $672,000 | $1,758,000 | | **Total ABC cost** | $3,912,000 | $5,118,000 | | **Number of units** | 100,000 | 40,000 | | **Unit cost** | $39.12 | $127.95 | **Required:** **a.** Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900. | **Model** | **Total ABC Overhead** | |-----------|------------------------| | Sport | | | Pro | | **Explanation of Overhead Allocation** - **Assembly Building Overhead:** - Assembling is charged at $30 per machine hour (MH). -
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