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145) Excel Manufacturing has an activity-based costing system with three activity cost pools-
Machining, Batch Setup, and Other. The company’s overhead costs have already been allocated
to the cost pools and total $28,000 for the Machining cost pool, $13,800 for the Batch Setup cost
pool, and $27,200 for the Other cost pool.
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and
costs in the Batch Setup cost pool are assigned to products based on the number of batches. Costs
in the Other cost pool are not assigned to products. Data concerning the company’s two products
and the company’s costs appear below:
MHs Batches
Product A 5,200 500
Product B 14,800 500
Total 20,000 1,000
Product A Product B
Sales $ 124,300 $ 166,000
Direct materials $ 53,100 $ 71,500
Direct labor $ 54,000 $ 56,600
Required:
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using activity-
based costing.
c. Determine the product margins for each product using activity-based costing.
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146) Sebastian Corporation’s activity-based costing system has three activity cost pools-
Machining, Batch Setup, and Other. The company’s overhead costs, which consist of equipment
depreciation and indirect labor, are allocated to the cost pools in proportion to the activity cost
pools’ consumption of resources.
Equipment depreciation $ 27,000
Indirect labor $ 7,000
Distribution of Resource Consumption Across Activity Cost Pools
Machining Batch Setup Other
Equipment depreciation 0.40 0.30 0.30
Indirect labor 0.20 0.30 0.50
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and
costs in the Batch Setup cost pool are assigned to products based on the number of batches. Costs
in the Other cost pool are not assigned to products.
MHs Batches
Product Snorkel 8,100 400
Product Fin 1,900 1,600
Total 10,000 2,000
Additional data concerning the company’s products appears below:
Product Snorkel Product Fin
Sales $ 71,400 $ 57,600
Direct materials $ 21,900 $ 19,900
Direct labor $ 33,700 $ 25,100
Required:
a. Assign overhead costs to activity cost pools using activity-based costing.
b. Calculate activity rates for each activity cost pool using activity-based costing.
c. Determine the amount of overhead cost that would be assigned to each product using activity-
based costing.
d. Determine the product margins for each product using activity-based costing.
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147) Farris Corporation’s activity-based costing system has three activity cost pools-Machining,
Batch Setup, and Other. The company’s overhead costs have already been allocated to these cost
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pools as follows:
Machining $ 15,200
Batch Setup 44,800
Other 16,000
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and
costs in the Batch Setup cost pool are assigned to products based on the number of batches. Costs
in the Other cost pool are not assigned to products. The following table shows the machine-hours
and number of batches associated with each of the company’s two products:
MHs Batches
Product Sea 2,000 800
Product Air 8,000 200
Total 10,000 1,000
Additional data concerning the company’s products appears below:
Product Sea Product Air
Sales $ 220,700 $ 165,500
Direct materials 78,600 83,100
Direct labor $ 89,600 58,000
Required:
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using activity-
based costing.
c. Determine the product margins for each product using activity-based costing.
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148) Swannee Company manufactures two products, Product A and Product B. The company
estimated it would incur $160,790 in manufacturing overhead costs during the current period.
Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning
the current period’s operations appear below:
Product A Product B
Estimated volume 3,400 units 4,800 units
Direct labor-hours per unit 1.40 hour 1.90 hours
Direct materials cost per unit $ 7.40 $ 12.70
Direct labor cost per unit $ 14.00 $ 19.00
Required:
a. Compute the predetermined overhead rate under the current method and determine the unit
product cost of each product for the current year.
b. The company is considering using an activity-based costing system to compute unit product
costs for external financial reports instead of its traditional system based on direct labor-hours.
The activity-based costing system would use three activity cost pools. Data relating to these
activities for the current period are given below:
Expected Activity
Activity Cost Pool Estimated Overhead Costs Product A Product B Total
Machine setups $ 12,190 80 150 230
Purchase orders 79,200 730 920 1,650
General Factory 69,400 4,760 9,120 13,880
$ 160,790
Determine the unit product cost of each product for the current period using the activity-based
costing approach.
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149) Merkel Industries has a traditional costing system in which it applies manufacturing
overhead to its products using a predetermined overhead rate based on direct labor-hours
(DLHs). The company has two products, Large and Small, about which it has provided the
following data:
Large Small
Direct materials per unit $ 17.80 $ 55.40
Direct labor per unit $ 16.10 $ 55.20
Direct labor-hours per unit 0.70 2.40
Annual production 30,000 15,000
The company’s estimated total manufacturing overhead for the year is $1,793,790 and the
company’s estimated total direct labor-hours for the year is 57,000.
The company is considering using a variation of activity-based costing to determine its unit
product costs for external reports. Data for this proposed activity-based costing system appear
below:
Activities and Activity Measures Estimated Overhead Cost
Supporting direct labor (DLHs) $ 285,000
Setting up machines (setups) 437,190
Parts administration (part types) 1,071,600
Total $ 1,793,790
Activities Large Small Total
Supporting direct labor 21,000 36,000 57,000
Setting up machines 798 2,565 3,363
Parts administration 1,539 1,140 2,679
Required:
a. Determine the unit product cost of each of the company’s two products under the traditional
costing system.
b. Determine the unit product cost of each of the company’s two products under activity-based
costing system.
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150) JamMaster Audio Corporation has a traditional costing system in which it applies
manufacturing overhead to its products using a predetermined overhead rate based on direct
labor-hours (DLHs). The company has two products, Boom and Wow, about which it has
provided the following data:
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Boom Wow
Direct materials per unit $ 14.90 $ 44.30
Direct labor per unit $ 4.20 $ 25.20
Direct labor-hours per unit 0.20 1.20
Annual production 40,000 15,000
The company’s estimated total manufacturing overhead for the year is $1,809,600 and the
company’s estimated total direct labor-hours for the year is 26,000.
The company is considering using a variation of activity-based costing to determine its unit
product costs for external reports. Data for this proposed activity-based costing system appear
below:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (DLHs) $ 702,000
Preparing batches (batches) 132,600
Engrave (MHs) 975,000
Total $ 1,809,600
Activities Boom Wow Total
Assembling products 8,000 18,000 26,000
Preparing batches 884 442 1,326
Engrave 702 1,248 1,950
Required:
a. Determine the unit product cost of each of the company’s two products under the traditional
costing system.
b. Determine the unit product cost of each of the company’s two products under activity-based
costing system.
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151) Smithville Industries has a traditional costing system in which it applies manufacturing
overhead to its products using a predetermined overhead rate based on direct labor-hours
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(DLHs). The company has two products, Manual and Power, about which it has provided the
following data:
Manual Power
Direct materials per unit $ 27.50 $ 64.90
Direct labor per unit $ 7.80 $ 23.40
Direct labor-hours per unit 0.60 1.80
Annual production 40,000 15,000
The company’s estimated total manufacturing overhead for the year is $2,675,460 and the
company’s estimated total direct labor-hours for the year is 51,000.
The company is considering using a variation of activity-based costing to determine its unit
product costs for external reports. Data for this proposed activity-based costing system appear
below:
Activities and Activity Measures Estimated Overhead Cost
Supporting direct labor (DLHs) $ 1,326,000
Setting up machines (setups) 456,960
Parts administration (part types) 892,500
Total $ 2,675,460
Manual Power Total
Supporting direct labor 24,000 27,000 51,000
Setting up machines 2,346 510 2,856
Parts administration 1,122 663 1,785
Required:
a. Determine the manufacturing overhead cost per unit of each of the company’s two products
under the traditional costing system.
b. Determine the manufacturing overhead cost per unit of each of the company’s two products
under activity-based costing system.
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152) Matchbox Manufacturing has a traditional costing system in which it applies manufacturing
overhead to its products using a predetermined overhead rate based on direct labor-hours
(DLHs). The company has two products, Utility and Super, about which it has provided the
following data:
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Utility Super
Direct materials per unit $ 34.10 $ 52.70
Direct labor per unit $ 16.10 $ 39.10
Direct labor-hours per unit 0.70 1.70
Annual production 30,000 10,000
The company’s estimated total manufacturing overhead for the year is $1,527,600 and the
company’s estimated total direct labor-hours for the year is 38,000.
The company is considering using a variation of activity-based costing to determine its unit
product costs for external reports. Data for this proposed activity-based costing system appear
below:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (DLHs) $ 608,000
Preparing batches (batches) 197,600
Axial milling (MHs) 722,000
Total $ 1,527,600
Utility Super Total
Assembling products 21,000 17,000 38,000
Preparing batches 456 1,520 1,976
Axial milling 570 874 1,444
Required:
a. Determine the manufacturing overhead cost per unit of each of the company’s two products
under the traditional costing system.
b. Determine the manufacturing overhead cost per unit of each of the company’s two products
under activity-based costing system.
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153) The manager of the Personnel Department at King Enterprises has been reading about time-
driven ABC and wants to apply it to her department. She has identified four basic activities
where her employees spend the most time: Interviewing; Hiring, Assessment, and Separation
Processing. The Department employs five staff who perform these activities. The manager
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provides the following estimates for the amount of time it takes to complete each of these
activities:
∙ Interviewing: 40 minutes;
∙ Hiring: 60 minutes;
∙ Assessment: 85 minutes;
∙ Separation processing: 95 minutes.
Employees in Personnel work 35-hour weeks with four weeks for vacation. Of the 35 hours, five
are reserved for administrative tasks, training, and so on. The costs of the personnel department,
including any allocated costs from other staff functions is $1,404,000. During the year, Personnel
conducted 1,200 interviews, made 405 hires, made 2,850 assessments, and had 235 separations.
Required:
a. What is the cost per minute for activities in Personnel?
b. What is the cost of interviewing and hiring one employee?
c. How many minutes of unused capacity did Personnel have for the year?
d. What was the cost of the unused capacity in Personnel?
