86.
Allure Company manufactures and distributes two products, M and XY. Overhead costs
are currently allocated using the number of units produced as the allocation base. The
controller has recommended changing to an activity-based costing (ABC) system. She has
collected the following information:
Activity
Cost
Driver
Amount
M
XY
Production
setups
Number of
setups
$82,000
8
12
Material
handling
Number of
parts
48,000
56
24
Packaging
costs
Number of
units
130,000
80,000
50,000
$260,000
87.
Allure Company manufactures and distributes two products, M and XY. Overhead costs
are currently allocated using the number of units produced as the allocation base. The
controller has recommended changing to an activity-based costing (ABC) system. She has
collected the following information:
Activity
Cost
Driver
Amount
M
XY
Production
setups
Number of
setups
$82,000
8
12
Material
handling
Number of
parts
48,000
56
24
Packaging
costs
Number of
units
130,000
80,000
50,000
$260,000
What is the total overhead per unit allocated to Product M using activity-based costing
(ABC)?
88.
Allure Company manufactures and distributes two products, M and XY. Overhead costs
are currently allocated using the number of units produced as the allocation base. The
controller has recommended changing to an activity-based costing (ABC) system. She has
collected the following information:
Activity
Cost
Driver
Amount
M
XY
Production
setups
Number of
setups
$82,000
8
12
Material
handling
Number of
parts
48,000
56
24
Packaging
costs
Number of
units
130,000
80,000
50,000
$260,000
9-66
89.
Allure Company manufactures and distributes two products, M and XY. Overhead costs
are currently allocated using the number of units produced as the allocation base. The
controller has recommended changing to an activity-based costing (ABC) system. She has
collected the following information:
Activity
Cost
Driver
Amount
M
XY
Production
setups
Number of
setups
$82,000
8
12
Material
handling
Number of
parts
48,000
56
24
Packaging
costs
Number of
units
130,000
80,000
50,000
$260,000
90.
The Mega Construction Company recently switched to activity-based costing (ABC) from
the department allocation method. The department method allocated overhead costs at a
rate of $60 per machine hour. The cost accountant for the Finishing Department has
gathered the following data:
Activity
Cost Drivers
Rate
9-67
Material
handling
Tons of material handled
$80
Machine setups
Number of production
runs
3,750
Utilities
Machine hours
25
Quality control
Number of inspections
500
91.
The Mega Construction Company recently switched to activity-based costing (ABC) from
the department allocation method. The department method allocated overhead costs at a
rate of $60 per machine hour. The cost accountant for the Finishing Department has
gathered the following data:
Activity
Cost Drivers
Rate
Material
handling
Tons of material handled
$80
Machine setups
Number of production
runs
3,750
Utilities
Machine hours
25
Quality control
Number of inspections
500
9-69
92.
Markham Company makes two products: Basic Product and Deluxe Product. Annual
production and sales are 1,700 units of Basic Product and 1,100 units of Deluxe Product.
The company has traditionally used direct labor-hours as the basis for applying all
manufacturing overhead to products. Basic Product requires 0.3 direct labor hours per unit
and Deluxe Product requires 0.6 direct labor hours per unit. The total estimated overhead
for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose
of computing unit product costs for external reports. The new activity-based costing
system would have three overhead activity cost pools—Activity 1, Activity 2, and General
Factory—with estimated overhead costs and expected activity as follows:
Estimated
Expected Activity
Activity
Cost Pool
Overhead
Costs
Basic
Product
Deluxe
Product
Total
Activity 1
$30,528
1,000
600
1,600
Activity 2
17,385
1,700
200
1,900
General
Factory
50,872
510
660
1,170
Total
$98,785
9-71
93.
Markham Company makes two products: Basic Product and Deluxe Product. Annual
production and sales are 1,700 units of Basic Product and 1,100 units of Deluxe Product.
The company has traditionally used direct labor-hours as the basis for applying all
manufacturing overhead to products. Basic Product requires 0.3 direct labor hours per unit
and Deluxe Product requires 0.6 direct labor hours per unit. The total estimated overhead
for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose
of computing unit product costs for external reports. The new activity-based costing
system would have three overhead activity cost pools—Activity 1, Activity 2, and General
Factory—with estimated overhead costs and expected activity as follows:
Estimated
Expected Activity
Activity
Cost Pool
Overhead
Costs
Basic
Product
Deluxe
Product
Total
Activity 1
$30,528
1,000
600
1,600
Activity 2
17,385
1,700
200
1,900
General
Factory
50,872
510
660
1,170
Total
$98,785
94.
Markham Company makes two products: Basic Product and Deluxe Product. Annual
9-72
production and sales are 1,700 units of Basic Product and 1,100 units of Deluxe Product.
The company has traditionally used direct labor-hours as the basis for applying all
manufacturing overhead to products. Basic Product requires 0.3 direct labor hours per unit
and Deluxe Product requires 0.6 direct labor hours per unit. The total estimated overhead
for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose
of computing unit product costs for external reports. The new activity-based costing
system would have three overhead activity cost pools—Activity 1, Activity 2, and General
Factory—with estimated overhead costs and expected activity as follows:
Estimated
Expected Activity
Activity
Cost Pool
Overhead
Costs
Basic
Product
Deluxe
Product
Total
Activity 1
$30,528
1,000
600
1,600
Activity 2
17,385
1,700
200
1,900
General
Factory
50,872
510
660
1,170
Total
$98,785
9-74
95.
Markham Company makes two products: Basic Product and Deluxe Product. Annual
production and sales are 1,700 units of Basic Product and 1,100 units of Deluxe Product.
The company has traditionally used direct labor-hours as the basis for applying all
manufacturing overhead to products. Basic Product requires 0.3 direct labor hours per unit
and Deluxe Product requires 0.6 direct labor hours per unit. The total estimated overhead
for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose
of computing unit product costs for external reports. The new activity-based costing
system would have three overhead activity cost pools—Activity 1, Activity 2, and General
Factory—with estimated overhead costs and expected activity as follows:
Estimated
Expected Activity
Activity
Cost Pool
Overhead
Costs
Basic
Product
Deluxe
Product
Total
Activity 1
$30,528
1,000
600
1,600
Activity 2
17,385
1,700
200
1,900
General
Factory
50,872
510
660
1,170
Total
$98,785
9-76
96.
Chang Manufacturing 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, Plain and Fancy, about which
it has provided the following data:
Plain
Fancy
Direct materials per unit
$24.50
$59.30
Direct labor per unit
$5.00
$25.00
Direct labor-hours per unit
0.20
1.00
Annual production
45,000
15,000
The company’s estimated total manufacturing overhead for the year is $985,440 and the
company’s estimated total direct labor-hours for the year is 24,000.
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)
$384,000
Setting up machines
(setups)
255,840
Parts administration (part
types)
345,600
Total
$985,440
Expected Activity
Plain
Fancy
Total
DLHs
9,000
15,000
24,000
Setups
1,032
936
1,968
Part types
624
240
864
9-78
97.
Chang Manufacturing 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, Plain and Fancy, about which
it has provided the following data:
Plain
Fancy
Direct materials per unit
$24.50
$59.30
Direct labor per unit
$5.00
$25.00
Direct labor-hours per unit
0.20
1.00
Annual production
45,000
15,000
The company’s estimated total manufacturing overhead for the year is $985,440 and the
company’s estimated total direct labor-hours for the year is 24,000.
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)
$384,000
Setting up machines
(setups)
255,840
Parts administration (part
types)
345,600
Total
$985,440
Expected Activity
Plain
Fancy
Total
DLHs
9,000
15,000
24,000
Setups
1,032
936
1,968
Part types
624
240
864
9-79
