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110.
Mission Company is preparing its annual profit plan. As part of its analysis of the
profitability of individual products, the controller estimates the amount of overhead that
should be allocated to the individual product lines from the information provided below.
(CMA based)
Wall
Mirrors
Specialty
Windows
Units Produced
40
20
Material moves per
product line
5
15
Direct labor hours per
product line
200
300
Budgeted material handling costs: $50,000
Under an activity-based costing (ABC) system, the materials handling costs allocated to
one unit of specialty windows would be:
9-102
111.
Falcon Company manufactures and sells two models of a computer tablets. The Basic
Model is has limited networking capability while the Explorer Model has significantly more
features. The tablets are produced to order and the company has no inventories at the end
of the year.
The cost accounting system at Falcon allocates overhead to products based on direct-
labor cost. Overhead in year 1, which just ended, was $4,012,500. Other data for year 1 for
the two products follow:
Basic Model
(20,000 units)
Explorer
Model (3,000
units)
Sales revenue
$6,600,000
$3,645,000
Direct materials
3,200,000
450,000
Direct labor
1,600,000
675,000
Required:
a. Compute product line profits for the Basic Model and the Explorer Model for year 1.
b. A study of overhead shows that without the Basic Model, overhead would fall to
$2,750,000. Assume all other revenues and costs would remain the same for the Explorer
Model in year 2. Compute product line profits for the Explorer Model in year 2 assuming
the Basic Model was not produced or sold.
9-104
112.
Brenda's Big Burgers, a small hamburger restaurant and take-out drive-through, has
identified the following resources that it uses in its business:
Required:
Fill in the chart above indicating the activity level of each of these costs:
Unit-
level
Batch-
level
Product-
level
Facility-
level
A. Bread for
burger buns
B. Take-out
bags assuming
one per
customer
order
C. Ground
sirloin
D.
Mayonnaise,
catsup,
pickles, and
onions
E. Salary of
the restaurant
manager
F. Restaurant
rent
G. Workers
hourly wages
H. Advertising
and coupons
for Brenda’s
Colossal
Burger
9-107
113.
9-109
114.
Conform Foam Products produces different kinds of industrial packing materials, all in one
manufacturing facility. They have identified four activities for their costing system:
Materials management—allocated by number of purchase orders
Chemical processing—allocated on metric tons
Molding—allocated on direct labor hours
Packaging—allocated by number of units produced
The activity rates are as follows:
Materials
management
$10.00
Per purchase
order
Chemical processing
$6.50
Per metric ton
Molding
$23.50
Per direct labor
hour
Packaging
$0.25
Per unit
9-111
115.
Blalock Company manufactures and distributes several different products. The company
currently uses a plantwide allocation method for allocating overhead at a rate of $10 per
direct labor hour. Department A produces Products #101X and #102Y. Department A has
$262,000 in traceable overhead. Department B manufactures Product #103Z. Department
B has $128,000 in traceable overhead. The product costs (per unit) and other information
are as follows:
Products
101X
102Y
103Z
Direct
materials
$60.00
$58.00
$46.00
Direct
labor
42.00
31.50
12.00
Overhead
40.00
30.00
20.00
$142.00
$119.50
$78.00
Machine
hours
(per unit)
4
2
3
Number
of cases
(per
year)
3,000
5,000
6,000
9-113
116.
9-116
117.
Pretty Dog Corporation manufactures two models of grooming stations, a standard and a
deluxe model. The following activity and cost information has been compiled:
Product
Number
of
Setups
Number of
Components
Number of
Direct
Labor
Hours
Standard
3
30
650
Deluxe
7
50
150
Overhead
costs
$30,000
$50,000
9-118
118.
JennerMaid Company manufactures and distributes several different products. The
company currently uses a plantwide allocation method for allocating overhead at a rate of
$20 per direct labor hour. Department 1 produces Product X. Department 1 has $256,000
in traceable overhead. Department 2 manufactures Products Y and Z. Department 2 has
$524,000 in traceable overhead. The product costs (per unit) and other information are as
follows:
Products
X
Y
Z
Direct
materials
$85.00
$74.00
$66.00
Direct
labor
42.00
31.50
22.00
Overhead
40.00
30.00
20.00
$167.00
$135.50
$108.00
Machine
hours
(per unit)
4
2
3
Number
of units
(per
year)
6,000
10,000
12,000
9-120
119.
Cameron Company has two major segments with the following information:
East
West
Total
Annual Revenue
$400,000
$1,200,000
$1,600,000
Annual
salesperson
salaries
300,000
450,000
750,000
Number of
customers
60
90
150
Miles driven
180,000
120,000
300,000
The business also has overhead costs as follows:
Cost Pool
Cost in
Pool
Cost driver
Travel
$72,000
Number of miles
driven
Entertainment
288,000
Number of
customers
Administrative
289,000
Salaries
Total
$649,000
