1.
Concept Introduction:
Activity-based costing: Activity-based costing is one of the cost allocation methods where
The product cost per unit for each product.
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 product cost per unit on activity-based costing method for each product.
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- Overhead costs are assigned to each product based on __________________. A. the proportion of that products use of the cost driver B. a predetermined overhead rate for a single cost driver C. price of the product D. machine hours per productarrow_forwardWrappers Tape makes two products: Simple and Removable. It estimates it will produce 369,991 units of Simple and 146,100 of Removable, and the overhead for each of its cost pools is as follows: It has also estimated the activities for each cost driver as follows: Â How much is the overhead allocated to each unit of Simple and Removable?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
- Activity-based costing systems: A. use a single predetermined overhead rate based on machine hours instead of on direct labor B. frequently increase the overhead allocation to at least one product while decreasing the overhead allocation to at least one other product C. limit the number of cost pools D. always result in an increase of at least one products selling pricearrow_forwardRoberts 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_forward(Appendix 3A) Method of Least Squares Using Computer Spreadsheet Program The controller for Beckham Company believes that the number of direct labor hours is associated with overhead cost. He collected the following data on the number of direct labor hours and associated factory overhead cost for the months of January through August. Required: 1. Using a computer spreadsheet program such as Excel, run a regression on these data. Print out your results. 2. Using your results from Requirement 1, write the cost formula for overhead cost. (Note: Round the fixed cost to the nearest dollar and the variable rate to the nearest cent.) 3. CONCEPTUAL CONNECTION What is R2 based on your results? Do you think that the number of direct labor hours is a good predictor of factory overhead cost? 4. Assuming that expected September direct labor hours are 700, what is expected factory overhead cost using the cost formula in Requirement 2?arrow_forward
- Question 1 Use the information provided below to answer the following questions: 1.1 Calculate the predetermined overhead rate according to each of the following bases: 1.1.1 Product unit basis 1.1.2 1.1.3 1.2 1.2.1 1.2.2 1.3 Labour hour basis Primary cost basis (expressed to two decimal places) Calculate the manufacturing cost per unit using the following bases: Product unit basis Labour hour basis Determine the value of the over-applied or under-applied overheads. INFORMATION The following is the budget of a manufacturing entity that produces only one type of product: Budgeted direct materials cost Budgeted labour cost Budgeted manufacturing overheads: Fixed Variable Budgeted direct labour hours Budgeted machine hours Budgeted production Additional information Total R? R? R360 000 R240 000 R120 000 ? hours ? hours 30 000 units The actual number of units produced was 32 000 and the actual overheads amounted to R400 000. Per unit R30 R24 ? ? ? 10 hours 7.5 hoursarrow_forwardWhat will the unit product cost under Full costing method.arrow_forwardMaglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,204,000 based on production of 300,000 handheld consoles and 92,000 home consoles. Direct labor and direct materials costs were as follows. Handheld Home Total $378,000 693,000 $1,505,000 1,433,000 Direct labor $1,127,000 740,000 Materials Management has determined that overhead costs are…arrow_forward
- Question 4: Match Set A with Set B Set A Set B A. Allocate indirect and overhead costs to unit of products based on what actually used. 1. MOOP costing B. Where costs vary by machine, operation, department, or some other overhead costs. 2. Depreciation C. Start once manufacturing operations, tooling, set-up time and cycle time are estimated. 3. Operation costing 4. PHC costing D. Allocate an amount of money over the recovery life of asset. E. Estimate costs based on future and actual expenditure. 5. ABC costing Set A 1 3 4 5 Set B Your choicearrow_forwardStudy the information provided below and calculate the following:3.1 Manufacturing costs per unit for each product using the traditional absorption costing system 3.2 Manufacturing overheads cost per unit for each product using the ABC systemarrow_forward! Required information [The following information applies to the questions displayed below.] For many years, Thomson Company manufactured a single product called LEC 40. Then three years ago, the company automated a portion of its plant and at the same time introduced a second product called LEC 90 that has become increasingly popular. The LEC 90 is a more complex product, requiring 0.60 hours of direct labor time per unit to manufacture and extensive machining in the automated portion of the plant. The LEC 40 requires only 0.20 hours of direct labor time per unit and only a small amount of machining. Manufacturing overhead costs are currently assigned to products on the basis of direct labor-hours. Despite the growing popularity of the company's new LEC 90, profits have been declining steadily. Management is beginning to believe that there may be a problem with the company's costing system. Direct material and direct labor costs per unit are as follows: Direct materials Direct labor…arrow_forward
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