Activity-based costing (ABC) method : The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base). To compute : The activity-cost of generators and air compressors for the two activities

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Answer 1

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Chapter 26, Problem 26.18EX

(a)

To determine

Activity-based costing (ABC) method: The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base).

To compute: The activity-cost of generators and air compressors for the two activities

(b)

To determine

To draft: Product profitability report of Incorporation VG for the year ended December 31

(c)

To determine

To discuss: The inferences from the product profitability report.

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Fedora, Inc, uses a weighted-average process-costing system and has one production department. All materials are introduced at the start of manufacturing; in contrast, the conversion cost is incurred uniformly throughout production. The company had respective work-in-process inventories on May 1 and May 31 of 62,500 units and 72,500 units, the latter of which was 50% complete. The production supervisor noted that Fedora completed 100,000 units during the month. Costs in the May 1 work-in-process inventory were subdivided as follows: materials, $42,500; conversion, $95,000. During May, Fedora charged production with $388,750 of material and $760,000 of conversion, resulting in a material cost per equivalent unit of $2.50. a. Determine the number of units that Fedora started during May. b. Compute the number of equivalent units with respect to conversion cost. c. Determine the conversion cost per equivalent unit.

Sterling Corporation reports the following information: Units sold Units produced 2009 2010 2011 20,000 20,000 20,000 20,000 24,000 16,000 Fixed production costs $12,00,000 $12,00,000 $12,00,000 Variable production costs per unit $ 200 $ 200 $ 200 Selling price per unit $ 400 $ 400 $ 400 Fixed selling and administrative $ 4,00,000 $ 4,00,000 $ 4,00,000 Calculate the profit each year using variable costing. Explain why profit does not fluctuate from year to year using variable costing.

Answer 2

Question

Chapter 26, Problem 26.18EX

(a)

To determine

Activity-based costing (ABC) method: The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base).

To compute: The activity-cost of generators and air compressors for the two activities

(b)

To determine

To draft: Product profitability report of Incorporation VG for the year ended December 31

(c)

To determine

To discuss: The inferences from the product profitability report.

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Answer 3

Question

Chapter 26, Problem 26.18EX

(a)

To determine

Activity-based costing (ABC) method: The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base).

To compute: The activity-cost of generators and air compressors for the two activities

(b)

To determine

To draft: Product profitability report of Incorporation VG for the year ended December 31

(c)

To determine

To discuss: The inferences from the product profitability report.

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Answer 4

Question

Chapter 26, Problem 26.18EX

(a)

To determine

Activity-based costing (ABC) method: The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base).

To compute: The activity-cost of generators and air compressors for the two activities

(b)

To determine

To draft: Product profitability report of Incorporation VG for the year ended December 31

(c)

To determine

To discuss: The inferences from the product profitability report.

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Answer 5

Chapter 26, Problem 26.18EX

(a)

To determine

Activity-based costing (ABC) method: The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base).

To compute: The activity-cost of generators and air compressors for the two activities

(b)

To determine

To draft: Product profitability report of Incorporation VG for the year ended December 31

(c)

To determine

To discuss: The inferences from the product profitability report.

Answer 6

Chapter 26, Problem 26.18EX

(a)

To determine

Activity-based costing (ABC) method: The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base).

To compute: The activity-cost of generators and air compressors for the two activities

Answer 7

Chapter 26, Problem 26.18EX

(a)

To determine

Activity-based costing (ABC) method: The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base).

To compute: The activity-cost of generators and air compressors for the two activities

Answer 8

(b)

To determine

To draft: Product profitability report of Incorporation VG for the year ended December 31

Answer 9

(b)

To determine

To draft: Product profitability report of Incorporation VG for the year ended December 31

Answer 10

(c)

To determine

To discuss: The inferences from the product profitability report.

Answer 11

(c)

To determine

To discuss: The inferences from the product profitability report.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 26 - Why would management be concerned about the...Ch. 26 - Why would a manufacturing company with multiple...Ch. 26 - How do the multiple production department and the...Ch. 26 - Under what two conditions would the multiple...Ch. 26 - Prob. 5DQ Ch. 26 - Prob. 6DQ Ch. 26 - Prob. 7DQ Ch. 26 - Under what circumstances might the activity-based...Ch. 26 - Prob. 9DQ Ch. 26 - Prob. 10DQ

Solution Summary: The author explains the activity-based costing method, which allocates overheads to the products based on factory overhead rate for each activity or cost object.

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To draft: Product profitability report of Incorporation VG for the year ended December 31

To discuss: The inferences from the product profitability report.

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Chapter 26 Solutions