Briefly explain how a traditional, volume-based product-costing system operates.

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Answer 1

Textbook Question

Chapter 5, Problem 1RQ

Briefly explain how a traditional, volume-based product-costing system operates.

Expert Solution & Answer

To determine

Explain the manner in which the traditional product-costing system operates.

Explanation of Solution

Activity-based costing: It is a method that helps in finding the activities performed by a company and it tracks the indirect costs to the activities of the company that consumes resources.

The most frequently used cost drivers in traditional product-costing systems are direct-labor hours, direct-labor dollars, machine hours, and units of production.
All manufacturing-overhead costs are incorporated into one cost pool and they are applied to products on the single cost driver basis which is closely linked to production volume.

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Coronado Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi- purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hours x (54,000+10,200)]. Estimated annual manufacturing overhead is $1,566,090. Thus, the predetermined overhead rate is $16.26 or ($1,566,090 ÷ 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models. The company's managers identified six activity cost pools and related…

Coronado Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi- purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hours x (54,000+ 10,200)]. Estimated annual manufacturing overhead is $1,566,090. Thus, the predetermined overhead rate is $16.26 or ($1,566,090 ÷ 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models. The company's managers identified six activity cost pools and related…

Answer 2

Textbook Question

Chapter 5, Problem 1RQ

Briefly explain how a traditional, volume-based product-costing system operates.

Expert Solution & Answer

To determine

Explain the manner in which the traditional product-costing system operates.

Explanation of Solution

Activity-based costing: It is a method that helps in finding the activities performed by a company and it tracks the indirect costs to the activities of the company that consumes resources.

The most frequently used cost drivers in traditional product-costing systems are direct-labor hours, direct-labor dollars, machine hours, and units of production.
All manufacturing-overhead costs are incorporated into one cost pool and they are applied to products on the single cost driver basis which is closely linked to production volume.

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Answer 3

Textbook Question

Chapter 5, Problem 1RQ

Briefly explain how a traditional, volume-based product-costing system operates.

Expert Solution & Answer

To determine

Explain the manner in which the traditional product-costing system operates.

Explanation of Solution

Activity-based costing: It is a method that helps in finding the activities performed by a company and it tracks the indirect costs to the activities of the company that consumes resources.

The most frequently used cost drivers in traditional product-costing systems are direct-labor hours, direct-labor dollars, machine hours, and units of production.
All manufacturing-overhead costs are incorporated into one cost pool and they are applied to products on the single cost driver basis which is closely linked to production volume.

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Answer 4

Textbook Question

Chapter 5, Problem 1RQ

Briefly explain how a traditional, volume-based product-costing system operates.

Expert Solution & Answer

To determine

Explain the manner in which the traditional product-costing system operates.

Explanation of Solution

Activity-based costing: It is a method that helps in finding the activities performed by a company and it tracks the indirect costs to the activities of the company that consumes resources.

The most frequently used cost drivers in traditional product-costing systems are direct-labor hours, direct-labor dollars, machine hours, and units of production.
All manufacturing-overhead costs are incorporated into one cost pool and they are applied to products on the single cost driver basis which is closely linked to production volume.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Explain the manner in which the traditional product-costing system operates.

Explanation of Solution

Activity-based costing: It is a method that helps in finding the activities performed by a company and it tracks the indirect costs to the activities of the company that consumes resources.

The most frequently used cost drivers in traditional product-costing systems are direct-labor hours, direct-labor dollars, machine hours, and units of production.
All manufacturing-overhead costs are incorporated into one cost pool and they are applied to products on the single cost driver basis which is closely linked to production volume.

Answer 8

Expert Solution & Answer

To determine

Explain the manner in which the traditional product-costing system operates.

Explanation of Solution

Activity-based costing: It is a method that helps in finding the activities performed by a company and it tracks the indirect costs to the activities of the company that consumes resources.

The most frequently used cost drivers in traditional product-costing systems are direct-labor hours, direct-labor dollars, machine hours, and units of production.
All manufacturing-overhead costs are incorporated into one cost pool and they are applied to products on the single cost driver basis which is closely linked to production volume.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Explain the manner in which the traditional product-costing system operates.

Answer 12

Explanation of Solution

Activity-based costing: It is a method that helps in finding the activities performed by a company and it tracks the indirect costs to the activities of the company that consumes resources.

The most frequently used cost drivers in traditional product-costing systems are direct-labor hours, direct-labor dollars, machine hours, and units of production.
All manufacturing-overhead costs are incorporated into one cost pool and they are applied to products on the single cost driver basis which is closely linked to production volume.

Answer 13

Ch. 5 - Briefly explain how a traditional, volume-based...Ch. 5 - Prob. 2RQ Ch. 5 - Explain how an activity-based costing system...Ch. 5 - What are cost drivers? What is their role in an...Ch. 5 - List and briefly describe the four broad...Ch. 5 - How can an activity-based costing system alleviate...Ch. 5 - Prob. 7RQ Ch. 5 - How is the distinction between direct and indirect...Ch. 5 - Explain the concept of a pool rate in...Ch. 5 - Briefly explain two factors that tend to result in...

Briefly explain how a traditional, volume-based product-costing system operates.

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