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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 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 (total)
$124,300
$166,000
Direct materials
(total)
$53,100
$71,500
Direct labor
(total)
$54,000
$56,600
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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 (total)
$27,000
Indirect labor (total)
$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 (total)
$71,400
$57,600
Direct materials
(total)
$21,900
$19,900
Direct labor (total)
$33,700
$25,100
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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 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 (total)
$220,700
$165,500
Direct materials (total)
$78,600
$83,100
Direct labor (total)
$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
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