COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Chapter 5, Problem 5.41P
Unused capacity, activity-based costing, activity-based management. Archer Pro manufactures two models of sport bows, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect
| Archer Pro Budgeted Costs and Activities for the Year Ended December 31, 2017 | |
| Direct materials—Basic bows | $ 450,000 |
| Direct materials—Deluxe bows | 320,000 |
| Direct manufacturing labor—Basic bows | 155,000 |
| Direct manufacturing labor—Deluxe bows | 195,000 |
| Indirect manufacturing labor costs | 105,000 |
| Machine setup costs | 60,000 |
| Equipment and maintenance costs | 264,000 |
| Facility rent | 250,000 |
| Total | $1799,000 |
Other budget information follows:
| Basic | Deluxe | |
| Number of bows | 10,000 | 5,000 |
| Machine-hours | 15,000 | 18,000 |
| Number of setups | 500 | 300 |
| Square footage of production space used | 4,000 | 3,500 |
- 1. Calculate the cost per unit of each cost-allocation base.
Required
- 2. What is the budgeted cost of unused capacity?
- 3. Calculate the budgeted total cost and the cost per unit for each model.
- 4. Why might excess capacity be beneficial for Archer Pro? What are some of the issues Archer Pro should consider before increasing production to use the space?
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Chapter 5 Solutions
COST ACCOUNTING
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