I want to correct answer accounting Watson's Computer Company uses ABC to account for its manufacturing process.IndirectactivityActivitiesAllocation base (cost driver)budgetMaterials$52,000Based on the number of partshandlingMachine setup$30,000Based on the number of setupsAssembling$9,750Based on the number of partsPackaging$15,300Based on the number of finishedunitsWatson's Computer Company expects to produce 2,250 computers. Watson'sComputer Company also expects to use 13,000 parts and have 20 setups.The allocation rate for packaging is:a. $4b. $6.80c. $13.33d. $7.01

Step 1: Define Overhead Allocation RatesOverhead allocation rates are the rates used to allocate the…

Answered: Watson's Computer Company uses ABC to…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 9PA: Carltons Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to...

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Bienestar Inc., has the following departmental structure for producing a well-known multivitamin: A consultant designed the following cellular manufacturing structure for the same product: The times above the processes represent the time required to process one unit of product. Required: 1. Calculate the time required to produce a batch of 15 bottles using a batch-processing departmental structure. 2. Calculate the time to process 15 units using cellular manufacturing. 3. How much manufacturing time will the cellular manufacturing structure save for a batch of 15 units?
The management of Nova Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Nova: Direct labor hours were estimated as follows: In addition, the direct labor hours (dlh) used to produce a unit of each product in each department were determined from engineering records, as follows: a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using direct labor hours as the activity base. b. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department. c. Recommend to management a product costing approach, based on your analyses in (a) and (b). Support your recommendation.
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?
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?
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
Calculators P/L manufactures two types of products, Advanced and Simple, and applies manufacturing overhead to all units at the rate of $100 per machine hour. Production information follows. Simple Setups (SU) Machine hours (MH) Outgoing shipment (OS) The total cost for each activity were: $20 $15 1M Setups (SU) Machine hours (MH) Direct material cost Direct labour cost Budgeted volume (units) YOU determined that the firm's overhead can be identified with three activities: Simple Advanced 200 160,000 100 $30 $15 800,000 Advanced 300 140,000 80 Total 500 300,000 180 $1.25M $35M Outgoing shipment (OS) $2M ▪ Calculate the unit manufacturing cost of Simple and Advanced using Activity-Based Costing.
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Procurement Scheduling Materials handling Product development Production Activity Cost Activity Base $365,600 Number of purchase orders 245,100 Number of production orders 411,700 Number of moves 716,200 Number of engineering changes 1,470,000 Machine hours Disk drives Tape drives Wire drives Number of Number of Number Number of Production of Engineering Orders Moves Changes Purchase Orders 1,310 620 4,200 The activity rate for the scheduling activity cost pool is Oa. $20.55 per production order Ob. $61.00 per production order Oc. $238.18 per production order Od. $159.67 per production order 4,090 2,100 11,600 370 175 990 10 7 27 Machine Hours 2,500 9,600 12,000 Number of Units 2,200 3,800 2,700 Previous Next
II. Wongtien Electronics Corp. in Hong Kong, SAR, China, manufactures tablets, laptops and desktop PCs. Wongtien currently operates a standard absorption costing system. Budgeted information for next year is given below (currency in one thousand Hong Kong Dollars, HK$000):- Desktop PCs 9,880 2,200 800 Products Sales revenue Tablets 3,640 800 Laptops 12,480 2,800 1.200 Total 26,000 5,800- 2,300 Direct material Direct labor 300 Fixed production e overheads 1,456 1,084 4.992 3.488 3,952 2,928 10,400 7,500- Gross profit Fixed production overheads are currently absorbed based on a percentage of sales revenue. Wongtien is considering changing to an activity-based costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows: Activity Manufacturing scheduling mber of orders Parts handling Assembly Software installation and testing Packaging Cost driver Production overhead cost 162e Number of parts Assembly time Number of softwaree…
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Activity Cost Activity Base Procurement $339,200 Number of purchase orders Scheduling 204,100 Number of production orders Materials handling 459,900 Number of moves Product development 775,100 Number of engineering changes Production 1,593,800 Machine hours Number ofPurchaseOrders Number ofProductionOrders NumberofMoves Number ofEngineeringChanges MachineHours NumberofUnits Disk drives 4,050 260 1,370 10 2,300 2,500 Tape drives 1,600 125 600 3 8,700 4,200 Wire drives 12,000 780 3,700 30 10,600 2,000 The activity rate for the scheduling activity cost pool is
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Procurement Scheduling Materials handling Product development Production Disk drives Tape drives Wire drives Activity Cost $378,400 221,900 402,900 770,700 Number of engineering changes 1,402,800 Machine hours Number of Purchase Orders Activity Base Number of purchase orders Number of production orders Number of moves 4,160 2,100 11,100 Production Orders Number of Number of Moves 250 175 1,200 540 860 4,300 The activity rate for the materials handling cost pool is Oa. $63.76 per move Ob. $21.8 per move Oc. $172.68 per move Od. $66.71 per move Number of Engineering Machine Changes Hours 15 2,500 5 9,200 10,300 27 Number of Units 1,600 4,300 2,000
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Activity Cost Activity Base Procurement $309,800 Number of purchase orders Scheduling 207,900 Number of production orders Materials handling 427,200 Number of moves Product development 787,800 Number of engineering changes Production 1,508,300 Machine hours Number ofPurchaseOrders Number ofProductionOrders NumberofMoves Number ofEngineeringChanges MachineHours NumberofUnits Disk drives 3,930 330 1,340 11 1,800 1,800 Tape drives 2,400 165 710 4 8,100 3,600 Wire drives 13,000 700 4,400 20 10,400 2,100 The activity-based cost for each disk drive unit is a.$878.32 b.$16.03 c.$328.05 d.$223.91

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