Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
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Textbook Question
Chapter 6, Problem 4TP
Cape Cod Adventures makes foam noodles with sales of 3,000,000 units per year and retractable boat oars with sales of 50,000 pairs per year. What information would Cape Cod Adventures need in order to change from traditional to ABC costing? What are the limitations to activity-based costing?
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What challenges might managers at Lagoon encounter in achieving the target cost? How might they overcome these challenges?
Millennium Printers Inc. manufactures color laser printers. Model L-1819 presently sells for $150 and has a total product cost of $120, as follows:
Direct materials
$90
Direct labor
20
Factory overhead
10
Total
$120
It is estimated that the competitive selling price for color laser printers of this type will drop to $140 next year. Millennium Printers wants to establish a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost reduction ideas:
Purchase a plastic printer cover with snap-on assembly. This will reduce the amount of direct labor by nine minutes per unit.
Add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $3 per unit.
Decrease the cycle time of the injection molding machine from four minutes to three minutes per part. Thirty percent of the direct labor and 45% of the factory overhead is related to running injection molding machines.
The direct…
Millennium Printers Inc. manufactures color laser printers. Model L-1819 presently sells for $150 and has a total product cost of $120, as follows:
Direct materials
$90
Direct labor
20
Factory overhead
10
Total
$120
It is estimated that the competitive selling price for color laser printers of this type will drop to $140 next year. Millennium Printers wants to establish a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost reduction ideas:
Purchase a plastic printer cover with snap-on assembly. This will reduce the amount of direct labor by nine minutes per unit.
Add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $3 per unit.
Decrease the cycle time of the injection molding machine from four minutes to three minutes per part. Thirty percent of the direct labor and 45% of the factory overhead is related to running injection molding machines.
The direct…
Chapter 6 Solutions
Principles of Accounting Volume 2
Ch. 6 - Active Frame, Inc., manufactures clear and tinted...Ch. 6 - TyeDye Lights makes two products: Party and...Ch. 6 - Which is not a step in analyzing the cost driver...Ch. 6 - Overhead costs are assigned to each product based...Ch. 6 - Which of the following is a reason a company would...Ch. 6 - Which is the correct formula for computing the...Ch. 6 - A company anticipates the cost to heat the...Ch. 6 - A company calculated the predetermined overhead...Ch. 6 - Which is not a step In activity-based costing? A....Ch. 6 - What is the proper order of tasks In an ABC...
Ch. 6 - Which is not a task typically associated with ABC...Ch. 6 - Which statement is correct? A. Activity-based cost...Ch. 6 - Activity-based costing systems: A. use a single...Ch. 6 - Activity-based costing is preferable in a system:...Ch. 6 - Absorption costing is also referred to as: A....Ch. 6 - Under variable costing, a unit of product includes...Ch. 6 - Under absorption costing, a unit of product...Ch. 6 - A downside to absorption casting is: not including...Ch. 6 - When the number of units in ending inventory...Ch. 6 - Product costs under variable costing are...Ch. 6 - What is the predetermined overhead rate, and when...Ch. 6 - When is an activity-based costing system better...Ch. 6 - What is the advantage of labeling activities as...Ch. 6 - What conditions are necessary to designate an...Ch. 6 - For each cost pool, identify an appropriate cost...Ch. 6 - How is the primary focus of activity-based costing...Ch. 6 - What are the primary differences between...Ch. 6 - How are service companies similar or different...Ch. 6 - How are costs allocated in an ABC system?Ch. 6 - In production, what has changed to allow ABC...Ch. 6 - Why is it important to know the true cost for a...Ch. 6 - What is the primary difference between variable...Ch. 6 - Why would managers prefer variable costing over...Ch. 6 - Why is absorption costing the method allowable for...Ch. 6 - Can a company gather information for both variable...Ch. 6 - Steeler Towel Company estimates its overhead to be...Ch. 6 - Crystal Pools estimates overhead will utilize...Ch. 6 - A company estimated 100,000 direct labor hours and...Ch. 6 - Cozy, Inc., manufactures small and large blankets....Ch. 6 - Identify appropriate cost drivers for these cost...Ch. 6 - Match the activity with the most appropriate cost...Ch. 6 - Rex Industries has two products. They manufactured...Ch. 6 - Rex Industries has identified three different...Ch. 6 - Customs makes two types of hats: polyester (poly)...Ch. 6 - Customs has three cost pools and an associated...Ch. 6 - Potterii sells its products to large box stores...Ch. 6 - Assign each of the following expenses to either...Ch. 6 - Tri-bikes manufactures two different levels of...Ch. 6 - Cool Pool has these costs associated with...Ch. 6 - Using this information from Planters. Inc., what...Ch. 6 - Green Bay Cheese Company estimates its overhead to...Ch. 6 - Boarders estimates overhead will utilize 160,000...Ch. 6 - A company estimated 50,000 direct labor hours and...Ch. 6 - Cozy, Inc., manufactures small and large blankets....Ch. 6 - Identify appropriate cost drivers for these cost...Ch. 6 - Match the activity with the most appropriate cost...Ch. 6 - Rocks Industries has two products. They...Ch. 6 - Rocks Industries has identified three different...Ch. 6 - Frenchys makes two types of scarves: polyester...Ch. 6 - Frenchys has three cost pools and an associated...Ch. 6 - Carboni recently added a carbon line in addition...Ch. 6 - Assign each of the following expenses to either...Ch. 6 - Stacks manufactures two different levels of hockey...Ch. 6 - Crafts 4 All has these costs associated with...Ch. 6 - Using this information from Outdoor Grills, what...Ch. 6 - Colonels uses a traditional cost system and...Ch. 6 - Five Card Draw manufactures and sells 24,000 units...Ch. 6 - A local picnic table manufacturer has budgeted...Ch. 6 - Explain how each activity in this list can be...Ch. 6 - Medical Tape makes two products: Generic and...Ch. 6 - Box Springs, Inc., makes two sizes of box springs:...Ch. 6 - Please use the information from this problem for...Ch. 6 - A company has traditionally allocated its overhead...Ch. 6 - Carltons Kitchens makes two types of pasta makers:...Ch. 6 - Carltons Kitchens three cost pools and overhead...Ch. 6 - Lampierre makes brass and gold frames. The company...Ch. 6 - Portable Seats makes two chairs: folding and...Ch. 6 - Grainger Company produces only one product and...Ch. 6 - Summarized data for Walrus Co. for its first year...Ch. 6 - Happy Trails has this information for its...Ch. 6 - Appliance Apps has the following costs associated...Ch. 6 - This information was collected for the first year...Ch. 6 - Bobcat uses a traditional cost system and...Ch. 6 - Five Card Draw manufactures and sells 10,000 units...Ch. 6 - A local picnic table manufacturer has budgeted the...Ch. 6 - Explain how each activity in this list can be...Ch. 6 - Wrappers Tape makes two products: Simple and...Ch. 6 - Box Springs. Inc., makes two sizes of box springs:...Ch. 6 - Please use the information from this problem for...Ch. 6 - A company has traditionally allocated its overhead...Ch. 6 - Caseys Kitchens makes two types of food smokers:...Ch. 6 - Caseys Kitchens three cost pools and overhead...Ch. 6 - Lampierre makes silver and gold candlesticks. The...Ch. 6 - Portable Seats makes two chairs: folding and...Ch. 6 - Submarine Company produces only one product and...Ch. 6 - Summarized data for Backdraft Co. for its first...Ch. 6 - Trail Outfitters has this information for its...Ch. 6 - Wifi Apps has these costs associated with its...Ch. 6 - This information was collected for the first year...Ch. 6 - What conditions are optimal for using traditional...Ch. 6 - College Cases sells cases for electronic devices...Ch. 6 - How would a service industry apply activity-based...Ch. 6 - Cape Cod Adventures makes foam noodles with sales...Ch. 6 - In designing a bonus structure to reward your...
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