Fundamentals Of Cost Accounting (6th Edition)
6th Edition
ISBN: 9781259969478
Author: WILLIAM LANEN, Shannon Anderson, Michael Maher
Publisher: McGraw Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 9, Problem 46E
Activity-Based versus Traditional Costing
Isadore’s Implements, Inc., manufactures pens and mechanical pencils often used for gifts.
Required
- a. Compute the amount of overhead to be allocated to each product under activity-based costing.
- b. Compute the amount of overhead to be allocated to each product using labor-hours as the allocation base. Assume that the number of labor-hours required to assemble each box is 0.1 for pencils and 0.2 for pens and that 45,000 boxes of pencils and 75,000 boxes of pens were produced during the period.
- c. Should the company follow the controller’s recommendations?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Activity-Based Costing Hakara Company has been using direct labor costs as the basis forassigning overhead to its many products. Under this allocation system, product A has been assignedoverhead of $10.80 per unit, while product B has been assigned $3.60 per unit. Management feels thatan ABC system will provide a more accurate allocation of the overhead costs and has collected thefollowing cost pool and cost driver information:Cost Pools Activity Costs Cost Drivers Activity Driver ConsumptionMachine setup $360,000 Setup hours 4,000Materials handling 100,000 Pounds of materials 20,000Electric power 40,000 Kilowatt-hours 40,000The following cost information pertains to the production of A and B, just two of Hakara’s manyproducts:A BNumber of units produced 4,000 20,000Direct materials cost $42,000 $54,000Direct labor cost $24,000 $40,000Number of setup hours 400 200Pounds of materials used 1,000 3,000Kilowatt-hours 2,000 4,000Required1. Use activity-based costing to determine a unit cost…
D, E , F please,
Chrzan, Incorporated, manufactures and sells two products: Product EO and Product NO. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
Product E0
Product Ne
Total direct labor-hours
Activity Cost Pools
Labor-related
Production orders
Order size
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Estimated
Overhead
Cost
Multiple Choice
$33.94 per MH
$54.20 per MH
Direct
Expected Labor-Hours
Production
Per Unit
10.1
410
1,550
9.1
$51.98 per MH
$21.40 per MH
Activity
Measures
DLHS
orders
MHs
Total
Direct
Labor-
Hours
$ 301,890
61,087
585,366
$948,343
The activity rate for the Order Size activity cost pool under activity-based costing is closest to:
4,141
14, 105
18,246
Product E
4,141
850
5,550
Expected Activity
Product NO
14, 105
950
5,250
Total
18,246
1,800
10,800
Chapter 9 Solutions
Fundamentals Of Cost Accounting (6th Edition)
Ch. 9 - Give examples of cost drivers commonly used to...Ch. 9 - What is the death spiral? How is it related to the...Ch. 9 - The product costs reported using either plantwide...Ch. 9 - Why do companies commonly use direct labor-hours...Ch. 9 - What are the costs of moving to an activity-based...Ch. 9 - What are the basic steps in computing costs using...Ch. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - What type of organization is most likely to...Ch. 9 - Prob. 10RQ
Ch. 9 - How does complexity lead to higher costs? Why is...Ch. 9 - Prob. 12RQCh. 9 - Prob. 13RQCh. 9 - Why are cost drivers based on direct labor widely...Ch. 9 - Prob. 15CADQCh. 9 - Activity-based costing could not be applied in a...Ch. 9 - Activity-based costing is the same as department...Ch. 9 - Prob. 18CADQCh. 9 - It is clear after reading this chapter that...Ch. 9 - Prob. 20CADQCh. 9 - Prob. 21CADQCh. 9 - Prob. 22CADQCh. 9 - Prob. 23CADQCh. 9 - Activity-based costing is just another inventory...Ch. 9 - Prob. 25CADQCh. 9 - Prob. 26CADQCh. 9 - Prob. 27CADQCh. 9 - One of the issues we identified with traditional...Ch. 9 - The cost accounting manager at your business says...Ch. 9 - Prob. 30CADQCh. 9 - Prob. 31ECh. 9 - Reported Costs and Decisions Kima Company...Ch. 9 - Plantwide versus Department Allocation Munoz...Ch. 9 - Plantwide versus Department Allocation Main Street...Ch. 9 - Unitwide versus Department...Ch. 9 - Prob. 36ECh. 9 - Prob. 37ECh. 9 - Upriver currently applies overhead on the basis of...Ch. 9 - Compute the unit costs for the two products, V-1...Ch. 9 - Prob. 40ECh. 9 - Prob. 41ECh. 9 - Activity-Based Costing in a Nonmanufacturing...Ch. 9 - Activity-Based versus Traditional Costing Maglie...Ch. 9 - Activity-Based Costing versus Traditional Costing...Ch. 9 - Activity-Based Costing in a Service Environment...Ch. 9 - Activity-Based versus Traditional Costing Isadores...Ch. 9 - Prob. 47ECh. 9 - Activity-Based Costing: Cost Flows through...Ch. 9 - Prob. 49ECh. 9 - Activity-Based Costing for an Administrative...Ch. 9 - Prob. 51ECh. 9 - Time-Driven Activity-Based Costing Kim...Ch. 9 - Time-Driven ABC for an Administrative Service The...Ch. 9 - Comparative Income Statements and Management...Ch. 9 - Comparative Income Statements and Management...Ch. 9 - Prob. 56PCh. 9 - Activity-Based Costing and Predetermined Overhead...Ch. 9 - Activity-Based Costing and Predetermined Overhead...Ch. 9 - Choosing an Activity-Based Costing System Pickle...Ch. 9 - Churchill Products is considering updating its...Ch. 9 - Utica Manufacturing (UM) was recently acquired by...Ch. 9 - Cain Components manufactures and distributes...Ch. 9 - Prob. 63PCh. 9 - Prob. 64PCh. 9 - Prob. 65PCh. 9 - Cawker Products has two manufacturing...Ch. 9 - MTI makes three types of lawn tractors: M3100,...Ch. 9 - Prob. 68PCh. 9 - Prob. 69PCh. 9 - Prob. 72IC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Which is not a step In activity-based costing? A. identify the activities performed by the organization B. identify the cost driver(s) associated with each activity C. compute a cost rate per production D. assign costs to products by multiplying the cost driver rate by the volume of the cost driver units consumed by the productarrow_forwardPotterii sells its products to large box stores and recently added a retail line of products to sell directly to consumers. These estimates are to be used in determining the overhead allocation rate for ABC: What would be the predetermined rate for each cost pool?arrow_forwardA company has traditionally allocated its overhead based on machine hours but collected this information to change to activity based costing: A. How much overhead would be assigned to each unit under the traditional allocation method? B. How much overhead would be assigned to each unit under activity-based costing?arrow_forward
- Trail Outfitters has this information for its manufacturing: Its income statement under absorption costing is as follows: Prepare an income statement with variable costing and a reconciliation statement between both methods.arrow_forwardActivity cost pools, activity rates, and product costs using activity-based costing Caldwell Home Appliances Inc. is estimating the activity cost associated with producing ovens and refrigerators. The indirect labor can be traced into four separate activity pools, based on time records provided by the employees. The budgeted activity cost and activity-base information are provided as follows: The estimated activity-base usage and unit information for two product lines was determined as follows: A. Determine the activity rate for each activity cost pool. B. Determine the activity-based cost per unit of each product.arrow_forwardHappy Trails has this information for its manufacturing: Â Its income statement under absorption costing is: Prepare an income statement with variable costing and a reconciliation statement between both methods.arrow_forward
- Freeman Furnishings has summarized its data as shown. Direct labor hours will be used as the activity base to allocate overhead: Compute the cost of goods manufactured.arrow_forwardComfort Foods Inc. uses activity-based costing to determine product costs. For each activity listed in the left column, match an appropriate activity base from the right column. You may use items in the activity-base list more than once or not at all.arrow_forwardFreeman Furnishings has summarized its data as shown: Compute the cost of goods manufactured, assuming that the overhead is allocated based on direct labor hoursarrow_forward
- Caseys Kitchens three cost pools and overhead estimates are as follows: Compare the overhead allocation using: A. The traditional allocation method B. The activity based costing method (Hint: the traditional method uses machine hours as the allocation base.)arrow_forwardA company has traditionally allocated its overhead based on machine hours but had collected this information to change to activity-based costing: A. How much overhead would be allocated to each unit under the traditional allocation method? B. How much overhead would be allocated to each unit under activity-based costing?arrow_forwardElectan Company produces two types of printers. The company uses ABC, and all activity drivers are duration drivers. Electan Company is considering using DBC and has gathered the following data to help with its decision. A. Activities with duration drivers: B. Activities with consumption ratios and costs: C. Products with cycle time and practical capacity: Required: 1. Using cycle time and practical capacity for each product, calculate the total time for all primary activities. Comment on the relationship to ABC. 2. Calculate the overhead rate that DBC uses to assign costs. Comment on the relationship to a unit-based plantwide overhead rate. 3. Use the overhead rate calculated in Requirement 2 to calculate (a) the overhead cost per unit for each product, and (b) the total overhead assigned to each product. How does this compare to the ABC assignments shown in Part B of the Information set? 4. What if the units actually produced were 10,000 for Printer A and 18,000 for Printer B. Using DBC, calculate the cost of unused capacity.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY