Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 5, Problem 5.24E
Department costing, service company. DLN is an architectural firm that designs and builds buildings. It prices each job on a cost plus 20% basis.
- 1. Compute the overhead allocated to each project in 2017 using the simple costing system that allocates overhead costs to jobs based on the number of jobs
Required
- 2. Compute the overhead allocated to each project in 2017 using department overhead cost rates.
- 3. Do you think Chandler had a valid reason for dissatisfaction with the cost and price of its building? How does the allocation based on department rates change costs for each project?
- 4. What value, if any, would DLN get by allocating costs of each department based on the activities done in that department?
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Department costing, service company. DLN is an architectural rm that designs and builds buildings. It prices each job on a cost plus 20% basis. Overhead costs in 2017 are $8,100,000. DLN’s simple costing system allocates overhead costs to its jobs based on number of jobs. There were three jobs in 2017. One customer, Chandler, has complained that the cost and price of its building in Chicago was not competitive. As a result, the controller has initiated a detailed review of the overhead allocation to determine if overhead costs should be charged to jobs in proportion to consumption of overhead resources by jobs. She gathers the following information:
What value, if any, would DLN get by allocating costs of each department based on the activities done in that department?
Parts World (PW) designs and produces automotive parts. In 2017, actual manufacturing overhead is $316,000. PW's simple costing system allocates manufacturing overhead to its three customers based on machine-hours and prices its contracts based on full costs. One of its customers has
regularly complained of being charged noncompetitive prices, so PW's controller Duncan Johnson realizes that it is time to examine the consumption of overhead resources more closely. He knows that there are three main departments that consume overhead resources: design, production, and
engineering. Interviews with the department personnel and examination of time records yield the following detailed information:
(Click the icon to view the information.)
Read the requirements.
Requirement 1. Compute the manufacturing overhead allocated to each customer in 2017 using the simple costing system that uses machine-hours as the allocation base.
Determine the formula needed to calculate overhead using the simple…
Chapter 5 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 5 - What is broad averaging, and what consequences can...Ch. 5 - Why should managers worry about product...Ch. 5 - What is costing system refinement? Describe three...Ch. 5 - What is an activity-based approach to designing a...Ch. 5 - Describe four levels of a cost hierarchy.Ch. 5 - Why is it important to classify costs into a cost...Ch. 5 - What are the key reasons for product cost...Ch. 5 - Prob. 5.8QCh. 5 - Department indirect-cost rates are never...Ch. 5 - Prob. 5.10Q
Ch. 5 - Prob. 5.11QCh. 5 - Prob. 5.12QCh. 5 - Activity-based costing is the wave of the present...Ch. 5 - Increasing the number of indirect-cost pools is...Ch. 5 - The controller of a retail company has just had a...Ch. 5 - Conroe Company is reviewing the data provided by...Ch. 5 - Prob. 5.17MCQCh. 5 - Cost hierarchy. Roberta, Inc., manufactures...Ch. 5 - ABC, cost hierarchy, service. (CMA, adapted)...Ch. 5 - Alternative allocation bases for a professional...Ch. 5 - Plant-wide, department, and ABC Indirect cost...Ch. 5 - Plant-wide, department, and activity-cost rates....Ch. 5 - ABC, process costing. Sander Company produces...Ch. 5 - Department costing, service company. DLN is an...Ch. 5 - Activity-based costing, service company....Ch. 5 - Activity-based costing, manufacturing. Decorative...Ch. 5 - ABC, retail product-line profitability. Fitzgerald...Ch. 5 - Prob. 5.28ECh. 5 - Activity-based costing. The job-costing system at...Ch. 5 - ABC, product costing at banks,...Ch. 5 - Problems 5-31 Job costing with single direct-cost...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - Department and activity-cost rates, service...Ch. 5 - Activity-based costing, merchandising. Pharmahelp,...Ch. 5 - Choosing cost drivers, activity-based costing,...Ch. 5 - ABC, health care. Crosstown Health Center runs two...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - ABC, implementation, ethics. (CMA, adapted) Plum...Ch. 5 - Activity-based costing, activity-based management,...
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