Whirlpool Corporation (WHR) conducted an activity-based costing study of its Evansville, Indiana, plant in order to identify its most profitable products. Assume that we select three representative refrigerators (out of 333): one low-, one medium-, and one high-volume refrigerator. Additionally, we assume the following activity-base information for each of the three refrigerators: Three Representative Refrigerators Refrigerator-Low Volume Refrigerator-Medium Volume Refrigerator-High Volume Activity rate Product Volume Class Low Machining Activity Medium Number of Machine Hours $160 High 24 225 900 Prior to conducting the study, the factory overhead allocation was based on a single machine hour rate. The machine hour rate was $200 per hour. After conducting the activity-based costing study, assume that three activities were used to allocate the factory overhead. The new activity rate information is assumed to be as follows: 000 $ Column A Single Rate Overhead Allocation Per Unit Number of Setups Setup Activity $240 14 13 9 a. Complete the following table, using the single machine hour rate to determine the per-unit factory overhead for each refrigerator (Column A) and the three activity-based rates to determine the activity-based factory overhead per unit (Column B). Finally, compute the percent change in per-unit allocation from the single to activity-based rate methods (Column C). $ $ $ Number of Sales Orders If required, round all per unit answers to the nearest cent. Round percents to one decimal place. For column C, use the minus sign to indicate a negative or decrease. Column B ABC Overhead Allocation Per Unit 38 88 $55 120 Sales Order Processing Activity Column C Percent Change in Allocation Number of Units % 160 1,500 6,000 % %
Whirlpool Corporation (WHR) conducted an activity-based costing study of its Evansville, Indiana, plant in order to identify its most profitable products. Assume that we select three representative refrigerators (out of 333): one low-, one medium-, and one high-volume refrigerator. Additionally, we assume the following activity-base information for each of the three refrigerators: Three Representative Refrigerators Refrigerator-Low Volume Refrigerator-Medium Volume Refrigerator-High Volume Activity rate Product Volume Class Low Machining Activity Medium Number of Machine Hours $160 High 24 225 900 Prior to conducting the study, the factory overhead allocation was based on a single machine hour rate. The machine hour rate was $200 per hour. After conducting the activity-based costing study, assume that three activities were used to allocate the factory overhead. The new activity rate information is assumed to be as follows: 000 $ Column A Single Rate Overhead Allocation Per Unit Number of Setups Setup Activity $240 14 13 9 a. Complete the following table, using the single machine hour rate to determine the per-unit factory overhead for each refrigerator (Column A) and the three activity-based rates to determine the activity-based factory overhead per unit (Column B). Finally, compute the percent change in per-unit allocation from the single to activity-based rate methods (Column C). $ $ $ Number of Sales Orders If required, round all per unit answers to the nearest cent. Round percents to one decimal place. For column C, use the minus sign to indicate a negative or decrease. Column B ABC Overhead Allocation Per Unit 38 88 $55 120 Sales Order Processing Activity Column C Percent Change in Allocation Number of Units % 160 1,500 6,000 % %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Single plantwide rate and activity-based costing
Whirlpool Corporation (WHR) conducted an activity-based costing study of its
Evansville, Indiana, plant in order to identify its most profitable products. Assume
that we select three representative refrigerators (out of 333): one low-, one
medium-, and one high-volume refrigerator. Additionally, we assume the following
activity-base information for each of the three refrigerators:
Three Representative
Refrigerators
Refrigerator-Low Volume
Refrigerator-Medium Volume
Refrigerator-High Volume
Activity rate
Product Volume Class
Low
Number of Machine
Hours
Machining Activity
Medium
$160
High
24
225
900
Prior to conducting the study, the factory overhead allocation was based on a single
machine hour rate. The machine hour rate was $200 per hour. After conducting the
activity-based costing study, assume that three activities were used to allocate the
factory overhead. The new activity rate information is assumed to be as follows:
Setup Activity
$240
Column A
Single Rate
Overhead Allocation
Per Unit
Number of
Setups
14
13
9
$
$
Number of Sales
Orders
a. Complete the following table, using the single machine hour rate to determine
the per-unit factory overhead for each refrigerator (Column A) and the three
activity-based rates to determine the activity-based factory overhead per unit
(Column B). Finally, compute the percent change in per-unit allocation from the
single to activity-based rate methods (Column C).
Column B
ABC
Overhead Allocation
Per Unit
If required, round all per unit answers to the nearest cent. Round percents
to one decimal place. For column C, use the minus sign to indicate a negative or
decrease.
38
88
120
$55
Sales Order
Processing Activity
Column C
Percent Change in
Allocation
Number of
Units
%
160
%
1,500
6,000
%
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