1.
Concept Introduction:
Activity-based costing: Activity-based costing is one of the cost allocation methods where
The activity rates for both types.
2.
Concept Introduction:
Activity-based costing: Activity-based costing is one of the cost allocation methods where overhead costs are allocated based on activity usage. It can be determined by using multiplying activity rate and activity usage. Activities can be classified as production, setups, design, and factory services.
The overhead cost for each type of glass.
3.
Concept Introduction:
Activity-based costing: Activity-based costing is one of the cost allocation methods where overhead costs are allocated based on activity usage. It can be determined by using multiplying activity rate and activity usage. Activities can be classified as production, setups, design, and factory services.
The product cost per unit for each type of glass.
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- Roberts Company produces two weed eaters: basic and advanced. The company has four activities: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below. Overhead costs: Required: 1. Calculate the four activity rates. 2. Calculate the unit costs using activity rates. Also, calculate the overhead cost per unit. 3. What if consumption ratios instead of activity rates were used to assign costs instead of activity rates? Show the cost assignment for the inspection activity.arrow_forwardActivity-based product costing Sweet Sugar Company manufactures three products (white sugar, brown sugar, and powdered sugar) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows: The activity bases identified for each activity are as follows: The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: Each product requires 0.5 machine hour per unit. Instructions Determine the activity rate for each activity. Determine the total and per-unit activity cost for all three products. Round to nearest cent. Why arent the activity unit costs equal across all three products since they require the same machine time per unit?arrow_forwardActivity-based costing: selling and administrative expenses Jungle Junior Company manufactures and sells outdoor play equipment. Jungle Junior uses activity-based costing to determine the cost of the sales order processing and the customer return activity. The sales order processing activity has an activity rate of 20 per sales order, and the customer return activity has an activity rate of 100 per return. Jungle Junior sold 2,500 swing sets, which consisted of 750 orders and 80 returns. Determine (A) the total and (B) the per-unit sales order processing and customer return activity cost for swing sets.arrow_forward
- Use the following information for Brief Exercises 4-34 and 4-35: Sanjay Company manufactures a product in a factory that has two producing departments, Assembly and Painting, and two support departments, S1 and S2. The activity driver for S1 is square footage, and the activity driver for S2 is number of machine hours. The following data pertain to Sanjay: Brief Exercises 4-34 (Appendix 4B) Assigning Support Department Costs by Using the Direct Method Refer to the information for Sanjay Company above. Required: 1. Calculate the cost assignment ratios to be used under the direct method for Departments S1 and S2. (Note: Each support department will have two ratiosone for Assembly and the other for Painting.) 2. Allocate the support department costs to the producing departments by using the direct method.arrow_forwardAllocating selling and administrative expenses using activity-based costing Shrute Inc. manufactures office copiers, which are sold to retailers. The price and cost of goods sold for each copier are as follows: In addition, the company incurs selling and administrative expenses of 414,030. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related to its three major nonmanufacturing activities: customer service, sales order processing, and advertising support. The advertising support is in the form of advertisements that are placed by Shrute Inc. to support the retailers sale of Shrute copiers to consumers. The budgeted activity costs and activity bases associated with these activities are: Activity-base usage and unit volume information for the three customers is as follows: Instructions Determine the activity rates for each of the three nonmanufacturing activities. Determine the activity costs allocated to the three customers, using the activity rates in (1). Construct customer profitability reports for the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and operating income associated with each customer. Provide recommendations to management, based on the profitability reports in (3).arrow_forwardActivity-based product costing Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows: The activity bases identified for each activity are as follows: The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: Each product requires 40 minutes per unit of machine time. Instructions Determine the activity rate for each activity. Determine the total and per-unit activity cost for all three products. Round to nearest cent. Why arent the activity unit costs equal across all three products since they require the same machine time per unit?arrow_forward
- Lampierre makes brass and gold frames. The company computed this information to decide whether to switch from the traditional allocation method to ABC: The estimated overhead for the material cost pool is estimated as $12,500, and the estimate for the machine setup pool is $35,000. Calculate the allocation rate per unit of brass and per unit of gold using: A. The traditional allocation method B. The activity-based costing methodarrow_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_forwardAllocating selling and administrative expenses using activity-based costing Arctic Air Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows: In addition, the company incurs selling and administrative expenses of 226,250. The company wishes to assign these costs to its three major customers, Gough Industries, Breen Inc., and The Martin Group. These expenses are related to three major nonmanufacturing activities: customer service, project bidding, and engineering support. The engineering support is in the form of engineering changes that are placed by the customer to change the design of a product. The budgeted activity costs and activity bases associated with these activities are: Activity-base usage and unit volume information for the three customers is as follows: Instructions 1. Determine the activity rates for each of the three nonmanufacturing activity pools. 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). 3. Construct customer profitability reports for the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and operating income associated with each customer. 4. Provide recommendations to management, based on the profitability reports in (3).arrow_forward
- Activity-based and department rate product costing and product cost distortions Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Instructions Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is 315,000 and 540,000 for the Cutting and Finishing departments, respectively. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Determine the total and per-unit cost assigned to each product under activity-based costing. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods.arrow_forwardFriedman Company uses JIT manufacturing. There are several manufacturing cells set up within one of its factories. One of the cells makes stands for flat-screen televisions. The cost of production for the month of April is given below. During May, 30,000 stands were produced and sold. Required: 1. Explain why process costing can be used for computing the cost of production for the stands. 2. Calculate the cost per unit for a stand. 3. Explain how activity-based costing can be used to determine the overhead assigned to the cell.arrow_forward(Appendix 3A) Separating Fixed and Variable Costs, Service Setting Louise McDermott, controller for the Galvin plant of Veromar Inc., wanted to determine the cost behavior of moving materials throughout the plant. She accumulated the following data on the number of moves (from 100 to 800 in increments of 100) and the total cost of moving materials at those levels of moves: Required: 1. Prepare a scattergraph based on these data. Use cost for the vertical axis and number of moves for the horizontal axis. Based on an examination of the scattergraph, does there appear to be a linear relationship between the total cost of moving materials and the number of moves? 2. Compute the cost formula for moving materials by using the high-low method. Calculate the predicted cost for a month with 550 moves by using the high-low formula. (Note: Round the answer for the variable rate to three decimal places and the answer for total fixed cost and total cost to the nearest dollar.) 3. CONCEPTUAL CONNECTION Compute the cost formula for moving materials using the method of least squares. (Note: For the method of least squares, round the variable rate to two decimal places and total fixed cost and total cost to the nearest dollar.) Using the regression cost formula, what is the predicted cost for a month with 550 moves? What does the coefficient of determination tell you about the cost formula computed by regression? 4. CONCEPTUAL CONNECTION Evaluate the cost formula using the least squares coefficients. Could it be improved? Try dropping the third data point (300, 3,400), and rerun the regression.arrow_forward
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