Watson's Computer Company uses ABC to account for its manufacturing process. Activities activity Allocation base (cost driver) Indirect budget $52,000 Materials handling Machine setup $30,000 Assembling $9,750 Packaging $15,300 Based on the number of parts Based on the number of setups Based on the number of parts Based on the number of finished units Watson's Computer Company expects to produce 2,250 computers. Watson's Computer Company also expects to use 13,000 parts and have 20 setups. The allocation rate for packaging is: a. $4 b. $6.80 c. $13.33 d. $7.01

Watson's Computer Company uses ABC to account for its manufacturing process. Activities activity Allocation base (cost driver) Indirect budget $52,000 Materials handling Machine setup $30,000 Assembling $9,750 Packaging $15,300 Based on the number of parts Based on the number of setups Based on the number of parts Based on the number of finished units Watson's Computer Company expects to produce 2,250 computers. Watson's Computer Company also expects to use 13,000 parts and have 20 setups. The allocation rate for packaging is: a. $4 b. $6.80 c. $13.33 d. $7.01

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter15: Lean Accounting And Productivity Measurement

Section: Chapter Questions

Problem 6E: Bienestar Inc., has the following departmental structure for producing a well-known multivitamin: A...

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Carltons Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to manufacture 70,000 units of Strands, which has a per-unit direct material cost of $10 and a per-unit direct labor cost of $60. It also expects to manufacture 30.000 units of Shapes, which has a per-unit material cost of $15 and a per-unit direct labor cost of $40. It is estimated that Strands will use 140,000 machine hours and Shapes will require 60,000 machine hours. Historically, the company has used the traditional allocation method and applied overhead at a rate of $21 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is shown: The cost driver for each cost pool and its expected activity is shown: A. What is the per-unit cost for each product under the traditional allocation method? B. What is the per-unit cost for each product under ABC costing?
Medical Tape makes two products: Generic and Label. It estimates it will produce 423,694 units of Generic and 652,200 of Label, and the overhead for each of its cost pools is as follows: It has also estimated the activities for each cost driver as follows: How much is the overhead allocated to each unit of Generic and Label?
Evans, Inc., has a unit-based costing system. Evanss Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity, each product uses about the same labor time and materials. The plant has used direct labor hours for years to assign overhead to products. To help design engineers understand the assumed cost relationships, the Cost Accounting Department developed the following cost equation. (The equation describes the relationship between total manufacturing costs and direct labor hours; the equation is supported by a coefficient of determination of 60 percent.) Y=5,000,000+30X,whereX=directlaborhours The variable rate of 30 is broken down as follows: Because of competitive pressures, product engineering was given the charge to redesign products to reduce the total cost of manufacturing. Using the above cost relationships, product engineering adopted the strategy of redesigning to reduce direct labor content. As each design was completed, an engineering change order was cut, triggering a series of events such as design approval, vendor selection, bill of materials update, redrawing of schematic, test runs, changes in setup procedures, development of new inspection procedures, and so on. After one year of design changes, the normal volume of direct labor was reduced from 250,000 hours to 200,000 hours, with the same number of products being produced. Although each product differs in its labor content, the redesign efforts reduced the labor content for all products. On average, the labor content per unit of product dropped from 1.25 hours per unit to one hour per unit. Fixed overhead, however, increased from 5,000,000 to 6,600,000 per year. Suppose that a consultant was hired to explain the increase in fixed overhead costs. The consultants study revealed that the 30 per hour rate captured the unit-level variable costs; however, the cost behavior of other activities was quite different. For example, setting up equipment is a step-fixed cost, where each step is 2,000 setup hours, costing 90,000. The study also revealed that the cost of receiving goods is a function of the number of different components. This activity has a variable cost of 2,000 per component type and a fixed cost that follows a step-cost pattern. The step is defined by 20 components with a cost of 50,000 per step. Assume also that the consultant indicated that the design adopted by the engineers increased the demand for setups from 20,000 setup hours to 40,000 setup hours and the number of different components from 100 to 250. The demand for other non-unit-level activities remained unchanged. The consultant also recommended that management take a look at a rejected design for its products. This rejected design increased direct labor content from 250,000 hours to 260,000 hours, decreased the demand for setups from 20,000 hours to 10,000 hours, and decreased the demand for purchasing from 100 component types to 75 component types, while the demand for all other activities remained unchanged. Required: 1. Using normal volume, compute the manufacturing cost per labor hour before the year of design changes. What is the cost per unit of an average product? 2. Using normal volume after the one year of design changes, compute the manufacturing cost per hour. What is the cost per unit of an average product? 3. Before considering the consultants study, what do you think is the most likely explanation for the failure of the design changes to reduce manufacturing costs? Now use the information from the consultants study to explain the increase in the average cost per unit of product. What changes would you suggest to improve Evanss efforts to reduce costs? 4. Explain why the consultant recommended a second look at a rejected design. Provide computational support. What does this tell you about the strategic importance of cost management?
Watson's Computer Company uses ABC to account for its manufacturing process. Activities Indirect activitybudget Allocation base (cost driver) Materials handling $55,000 Based on number of parts Machine setup $32,000 Based on number of setups Assembling $9820 Based on number of parts Packaging $15,100 Based on number of finished units Watson's Computer Company expects to produce 2330 computers. Watson's Computer Company also expects to use 11,000 parts and have 10 setups.The allocation rate for materials handling will be (Round all answers to two decimal places.) Question 16 options: $5.00 $6.48 $8.40 $23.61
A company, GizmoTech produces two products: Gizmo A and Gizmo B. The company has identified three major activities that drive overhead costs: Machine Maintenance: $120,000 ⚫ Order Processing: $50,000 Shipping: $80,000 The cost drivers for each activity are: • Machine Maintenance (Machine hours): 4,000 hours ⚫ Order Processing (Number of orders): 1,000 orders •Shipping (Number of shipments) 800 shipments The consumption of activities by Gizmo A and Gizmo B is as follow: Gizmo A: 1,500 machine hours ⚫ 600 orders • 400 shipments Gizmo B: 2,500 machine hours ⚫ 400 orders • 400 shipments Using Activity-Based Costing (ABC), calculate the overhead cots assigned to Gizmo A and Gizmo B for each activity and the total overhead cost for each product
Using the following information for question 8-10 Honeydew Company produces two products, a high-end laptop computer under the label Bunsen Laptops, and an inexpensive desktop computer under the label Beaker Computers. The two products use two overhead activities, with the following costs: Setting up equipment Machining $2,000 12,000 The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. Direct Labor Direct Materials Expected Production in Units Machine hours Setup hours 8. Calculate Beaker's consumption ratio for setup hours. a. 0.50 b. 0.45 c. 0.90 d. 0.25 Bunsen Beaker $20,000 $5,000 15,000 4,000 2,000 2,000 750 1,500 50 50
MI Enterprise manufactures 30,000 units of mobile phone memory cards which is coded as MI2210. This is used in their production line. At the current level of activity, the cost per unit for MI2210 is: Direct Materials $4; Direct Labor $ 7.5; Variable Manufacturing Overhead; $ 2.5Fixed Manufacturing Overhead $ 10; Total cost per part $24. An outside supplier has offered to sell 30,000 units of this part to MI Enterprise for $20 per part. MI Enterprise has determined that two-thirds of fixed manufacturing overhead being applied to part MI2210 would continue even if part MI2210 were purchased from the outside supplier. Should the outside supplier’s order be accepted? Justify your answer.
Munabhai
Using the following information for question 8-10 Honeydew Company produces two products, a high-end laptop computer under the label Bunsen Laptops, and an inexpensive desktop computer under the label Beaker Computers. The two products use two overhead activities, with the following costs: Setting up equipment Machining $2,000 12,000 The controller has collected the expected annual prime costs for each product, the machine the setup hours, and the expected production. Bunsen Beaker Direct Labor Direct Materials Expected Production in Units Machine hours $20,000 $5,000 15,000 4,000 2,000 2,000 750 1,500 Setup hours 50 50 8. Calculate Beaker's consumption ratio for setup hours. a. 0.50 b. 0.45 c. 0.90 d. 0.25
BDG Company manufactures two products (X and Y). The overhead costs (£100,000) have been divided into three cost pools that use the following activity drivers: Product Number of Setups 10 O A. £7,500 O B. £100 O.C. £17,500 OD. £25,000 Machine Hours 10 500 X Y 2,000 Cost per pool £15,000 £60,000 What is the amount of overhead cost to be assigned to Product Y using Parking Orders as the activity driver in an activity-based costing system? Packing Orders 75 - 175 £25,000
BDG Company manufactures two products (X and Y). The overhead costs (£100,000) have been divided into three cost pools that use the following activity drivers: Product Number of Setups 10 Machine Hours OA. £18.75 .O B. £22,500 O C. £60,000 O D. £37,500 Packing Orders X 1,200 Y 10 2,000 Cost per pool £15,000 £60,000 What is the amount of overhead cost to be assigned to Product X using Machine Hours as the activity driver in an activity-based costing system? 75 175 £25,000
Best Ink produces printers for personal computers. The following information is available for production of a recent order of 500 printers. Process time 16.0 hours Inspection time 3.5 hours Move time 9.0 hours Wait time 21.5 hours 1. Compute the company’s manufacturing cycle time. 2. Compute the company’s manufacturing cycle efficiency. 3. Assume the company wishes to increase its manufacturing cycle efficiency to 0.80. If process time is unchanged, what is the maximum number of hours of non-value-added time the company can have and meet this goal?