152. Figure 4-18
Marion Manufacturing uses an activity-based costing system. The company produces Model X and Model Y.
Information relating to the two products is as follows:
Model X
Model Y
Units produced
20,000
40,000
Machine hours
8,000
10,000
Direct labor hours
14,000
16,000
Engineering labor (hours)
1,000
1,400
Setups
40
60
The following costs are reported:
Engineering
$ 48,000
Setups
100,000
Machine-related overhead
144,000
Refer to Figure 4-18. Machine-related overhead would be classified as a
153. Figure 4-18
Marion Manufacturing uses an activity-based costing system. The company produces Model X and Model Y.
Information relating to the two products is as follows:
Model X
Model Y
Units produced
20,000
40,000
Machine hours
8,000
10,000
Direct labor hours
14,000
16,000
Engineering labor (hours)
1,000
1,400
Setups
40
60
The following costs are reported:
Engineering
$ 48,000
Setups
100,000
Machine-related overhead
144,000
Refer to Figure 4-18. Setups would be classified as a
154. Figure 4-19
Attraction Corporation produces specially machined parts. The parts are produced in batches in one continuous
manufacturing process. Each part is custom produced and requires special engineering design activity (based on
customer specifications). Once the design is completed, the equipment can be set up for batch production. Once
the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed.
Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. In addition,
there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have
been assigned to each activity using direct tracing and resource drivers:
Engineering
$1,000,000
Setups
900,000
Machining
2,000,000
Inspection
800,000
Providing space
250,000
Providing utilities
180,000
Activity drivers for each activity have been identified and their practical capacities listed:
Machine hours
25,000
Setups
200
Engineering hours
5,000
Inspection hours
2,500
The costs of facility-level activities are assigned using machine hours.
Refer to 4-19. What is (are) the facility-level activity(ies)?
155. Figure 4-19
Attraction Corporation produces specially machined parts. The parts are produced in batches in one continuous
manufacturing process. Each part is custom produced and requires special engineering design activity (based on
customer specifications). Once the design is completed, the equipment can be set up for batch production. Once
the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed.
Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. In addition,
there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have
been assigned to each activity using direct tracing and resource drivers:
Engineering
$1,000,000
Setups
900,000
Machining
2,000,000
Inspection
800,000
Providing space
250,000
Providing utilities
180,000
Activity drivers for each activity have been identified and their practical capacities listed:
Machine hours
25,000
Setups
200
Engineering hours
5,000
Inspection hours
2,500
The costs of facility-level activities are assigned using machine hours.
Refer to Figure 4-19. What is (are) the product-level activity(ies)?
156. Figure 4-19
Attraction Corporation produces specially machined parts. The parts are produced in batches in one continuous
manufacturing process. Each part is custom produced and requires special engineering design activity (based on
customer specifications). Once the design is completed, the equipment can be set up for batch production. Once
the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed.
Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. In addition,
there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have
been assigned to each activity using direct tracing and resource drivers:
Engineering
$1,000,000
Setups
900,000
Machining
2,000,000
Inspection
800,000
Providing space
250,000
Providing utilities
180,000
Activity drivers for each activity have been identified and their practical capacities listed:
Machine hours
25,000
Setups
200
Engineering hours
5,000
Inspection hours
2,500
The costs of facility-level activities are assigned using machine hours.
Refer to Figure 4-19. What is (are) the unit-level activity(ies)?
157. Batch-level costs are assigned using
158. If activity-based costing is used, electricity usage would be an example of a
159. Figure 4-20
Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one
continuous manufacturing process. Each part is custom produced and requires special engineering design
activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch
production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the
tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and
inspecting. Costs have been assigned to each activity using direct tracing and resource drivers:
Activity
Expected Cost
Activity Driver
Activity Capacity
Engineering
$1,000,000
engineering hours
5,000 hours
Setups
$ 900,000
setups
200 setups
Machining
$2,000,000
machine hours
25,000 machine hours
Inspection
$ 800,000
inspection hours
2,500 inspection hours
Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity.
Model C
Model D
Units completed
300,000
200,000
Engineering hours
1,000
4,000
Setups
80
120
Machine hours
20,000
5,000
Inspection hours
1,500
1,000
Refer to Figure 4-20. How much overhead is assigned to Model C using the 4 activity drivers?
160. Figure 4-20
Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one
continuous manufacturing process. Each part is custom produced and requires special engineering design
activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch
production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the
tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and
inspecting. Costs have been assigned to each activity using direct tracing and resource drivers:
Activity
Expected Cost
Activity Driver
Activity Capacity
Engineering
$1,000,000
engineering hours
5,000 hours
Setups
$ 900,000
setups
200 setups
Machining
$2,000,000
machine hours
25,000 machine hours
Inspection
$ 800,000
inspection hours
2,500 inspection hours
Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity.
Model C
Model D
Units completed
300,000
200,000
Engineering hours
1,000
4,000
Setups
80
120
Machine hours
20,000
5,000
Inspection hours
1,500
1,000
Refer to Figure 4-20. How much overhead is assigned to Model D using the 4 activity drivers?
161. Figure 4-20
Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one
continuous manufacturing process. Each part is custom produced and requires special engineering design
activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch
production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the
tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and
inspecting. Costs have been assigned to each activity using direct tracing and resource drivers:
Activity
Expected Cost
Activity Driver
Activity Capacity
Engineering
$1,000,000
engineering hours
5,000 hours
Setups
$ 900,000
setups
200 setups
Machining
$2,000,000
machine hours
25,000 machine hours
Inspection
$ 800,000
inspection hours
2,500 inspection hours
Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity.
Model C
Model D
Units completed
300,000
200,000
Engineering hours
1,000
4,000
Setups
80
120
Machine hours
20,000
5,000
Inspection hours
1,500
1,000
Refer to Figure 4-20. Determine the engineering costs assigned to model C using the two most expensive activities for cost pools. The costs of the
two relatively inexpensive activities are allocated to the two most expensive activities in proportion to their costs. (Round to two decimal places.)The
engineering cost assigned to model C would be
162. Figure 4-20
Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one
continuous manufacturing process. Each part is custom produced and requires special engineering design
activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch
production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the
tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and
inspecting. Costs have been assigned to each activity using direct tracing and resource drivers:
Activity
Expected Cost
Activity Driver
Activity Capacity
Engineering
$1,000,000
engineering hours
5,000 hours
Setups
$ 900,000
setups
200 setups
Machining
$2,000,000
machine hours
25,000 machine hours
Inspection
$ 800,000
inspection hours
2,500 inspection hours
Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity.
Model C
Model D
Units completed
300,000
200,000
Engineering hours
1,000
4,000
Setups
80
120
Machine hours
20,000
5,000
Inspection hours
1,500
1,000
Refer to Figure 4-20. First determine the overhead costs assigned to model D using the two most expensive activities for cost pools. The costs of the
two relatively inexpensive activities are allocated to the two most expensive activities in proportion to their costs. (Round to two decimal places.)The
engineering cost assigned to model D would be
163. Figure 4-20
Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one
continuous manufacturing process. Each part is custom produced and requires special engineering design
activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch
production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the
tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and
inspecting. Costs have been assigned to each activity using direct tracing and resource drivers:
Activity
Expected Cost
Activity Driver
Activity Capacity
Engineering
$1,000,000
engineering hours
5,000 hours
Setups
$ 900,000
setups
200 setups
Machining
$2,000,000
machine hours
25,000 machine hours
Inspection
$ 800,000
inspection hours
2,500 inspection hours
Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity.
Model C
Model D
Units completed
300,000
200,000
Engineering hours
1,000
4,000
Setups
80
120
Machine hours
20,000
5,000
Inspection hours
1,500
1,000
Refer to Figure 4-20. First, determine the overhead costs assigned to model D using the two most expensive activities for cost pools. The costs of the
two relatively inexpensive activities are allocated to the two most expensive activities in proportion to their costs. (Round to two decimal
places.)What is the error in the overhead cost assigned to model D using ABC (4 driver model) as the benchmark?
164. Figure 4-20
Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one
continuous manufacturing process. Each part is custom produced and requires special engineering design
activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch
production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the
tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and
inspecting. Costs have been assigned to each activity using direct tracing and resource drivers:
Activity
Expected Cost
Activity Driver
Activity Capacity
Engineering
$1,000,000
engineering hours
5,000 hours
Setups
$ 900,000
setups
200 setups
Machining
$2,000,000
machine hours
25,000 machine hours
Inspection
$ 800,000
inspection hours
2,500 inspection hours
Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity.
Model C
Model D
Units completed
300,000
200,000
Engineering hours
1,000
4,000
Setups
80
120
Machine hours
20,000
5,000
Inspection hours
1,500
1,000
Refer to Figure 4-20. What are the global consumption ratios of Model C and D respectively? (round to two decimal places)
165. Figure 4-20
Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one
continuous manufacturing process. Each part is custom produced and requires special engineering design
activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch
production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the
tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and
inspecting. Costs have been assigned to each activity using direct tracing and resource drivers:
Activity
Expected Cost
Activity Driver
Activity Capacity
Engineering
$1,000,000
engineering hours
5,000 hours
Setups
$ 900,000
setups
200 setups
Machining
$2,000,000
machine hours
25,000 machine hours
Inspection
$ 800,000
inspection hours
2,500 inspection hours
Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity.
Model C
Model D
Units completed
300,000
200,000
Engineering hours
1,000
4,000
Setups
80
120
Machine hours
20,000
5,000
Inspection hours
1,500
1,000
Refer to Figure 4-20. Using the activity ratios for engineering and machining, what is the overhead cost assigned to the engineering pool? (round to
two decimal places)
166. Figure 4-20
Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one
continuous manufacturing process. Each part is custom produced and requires special engineering design
activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch
production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the
tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and
inspecting. Costs have been assigned to each activity using direct tracing and resource drivers:
Activity
Expected Cost
Activity Driver
Activity Capacity
Engineering
$1,000,000
engineering hours
5,000 hours
Setups
$ 900,000
setups
200 setups
Machining
$2,000,000
machine hours
25,000 machine hours
Inspection
$ 800,000
inspection hours
2,500 inspection hours
Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity.
Model C
Model D
Units completed
300,000
200,000
Engineering hours
1,000
4,000
Setups
80
120
Machine hours
20,000
5,000
Inspection hours
1,500
1,000
Refer to Figure 4-20. Using the activity ratios for engineering and machining, what is the overhead rate for machining? (round to two decimal
places)
167. Figure 4-21
Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G.
Information relating to the two products is as follows:
Model F
Model G
Units produced
24,000
30,000
Machine hours
7,500
8,500
Direct labor hours
8,000
12,000
Material handling (number of moves)
4,000
6,000
Setups
5,000
7,000
Purchase orders
30
40
Inspections
10,000
14,000
Product line variations
8
12
The following overhead costs are reported for the following activities of the production process:
Material handling
$ 40,000
Labor-related overhead
120,000
Setups
60,000
Product design
100,000
Batch inspections
120,000
Central purchasing
70,000
Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below:
Activity
Cost Pool
Driver
Pool
Rate
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
$4
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
$6
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
$5
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
$5,000
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
$5
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
$1,000
30
$30,000
40
$40,000
$70,000
total
$209,000
$301,000
$510,000
Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
Refer to Figure 4-21. Under this new approach, which two activities would be selected as the cost pools?
168. Figure 4-21
Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G.
Information relating to the two products is as follows:
Model F
Model G
Units produced
24,000
30,000
Machine hours
7,500
8,500
Direct labor hours
8,000
12,000
Material handling (number of moves)
4,000
6,000
Setups
5,000
7,000
Purchase orders
30
40
Inspections
10,000
14,000
Product line variations
8
12
The following overhead costs are reported for the following activities of the production process:
Material handling
$ 40,000
Labor-related overhead
120,000
Setups
60,000
Product design
100,000
Batch inspections
120,000
Central purchasing
70,000
Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below:
Activity
Cost Pool
Driver
Pool
Rate
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
$4
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
$6
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
$5
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
$5,000
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
$5
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
$1,000
30
$30,000
40
$40,000
$70,000
total
$209,000
$301,000
$510,000
Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
Refer to Figure 4-21. Under this new approach, what cost would be assigned to materials handling?
169. Figure 4-21
Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G.
Information relating to the two products is as follows:
Model F
Model G
Units produced
24,000
30,000
Machine hours
7,500
8,500
Direct labor hours
8,000
12,000
Material handling (number of moves)
4,000
6,000
Setups
5,000
7,000
Purchase orders
30
40
Inspections
10,000
14,000
Product line variations
8
12
The following overhead costs are reported for the following activities of the production process:
Material handling
$ 40,000
Labor-related overhead
120,000
Setups
60,000
Product design
100,000
Batch inspections
120,000
Central purchasing
70,000
Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below:
Activity
Cost Pool
Driver
Pool
Rate
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
$4
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
$6
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
$5
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
$5,000
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
$5
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
$1,000
30
$30,000
40
$40,000
$70,000
total
$209,000
$301,000
$510,000
Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
Refer to Figure 4-21. Under this new approach, what cost would be assigned to the labor related cost pool?
170. Figure 4-21
Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G.
Information relating to the two products is as follows:
Model F
Model G
Units produced
24,000
30,000
Machine hours
7,500
8,500
Direct labor hours
8,000
12,000
Material handling (number of moves)
4,000
6,000
Setups
5,000
7,000
Purchase orders
30
40
Inspections
10,000
14,000
Product line variations
8
12
The following overhead costs are reported for the following activities of the production process:
Material handling
$ 40,000
Labor-related overhead
120,000
Setups
60,000
Product design
100,000
Batch inspections
120,000
Central purchasing
70,000
Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below:
Activity
Cost Pool
Driver
Pool
Rate
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
$4
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
$6
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
$5
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
$5,000
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
$5
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
$1,000
30
$30,000
40
$40,000
$70,000
total
$209,000
$301,000
$510,000
Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
Refer to Figure 4-21. Under this new approach using the new rates, what labor cost is assigned to Model F in this approximately relevant ABC
system?
171. Figure 4-21
Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G.
Information relating to the two products is as follows:
Model F
Model G
Units produced
24,000
30,000
Machine hours
7,500
8,500
Direct labor hours
8,000
12,000
Material handling (number of moves)
4,000
6,000
Setups
5,000
7,000
Purchase orders
30
40
Inspections
10,000
14,000
Product line variations
8
12
The following overhead costs are reported for the following activities of the production process:
Material handling
$ 40,000
Labor-related overhead
120,000
Setups
60,000
Product design
100,000
Batch inspections
120,000
Central purchasing
70,000
Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below:
Activity
Cost Pool
Driver
Pool
Rate
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
$4
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
$6
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
$5
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
$5,000
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
$5
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
$1,000
30
$30,000
40
$40,000
$70,000
total
$209,000
$301,000
$510,000
Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
Refer to Figure 4-21. Under this new approach, what is the new pool rate for labor related costs?
172. Figure 4-21
Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G.
Information relating to the two products is as follows:
Model F
Model G
Units produced
24,000
30,000
Machine hours
7,500
8,500
Direct labor hours
8,000
12,000
Material handling (number of moves)
4,000
6,000
Setups
5,000
7,000
Purchase orders
30
40
Inspections
10,000
14,000
Product line variations
8
12
The following overhead costs are reported for the following activities of the production process:
Material handling
$ 40,000
Labor-related overhead
120,000
Setups
60,000
Product design
100,000
Batch inspections
120,000
Central purchasing
70,000
Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below:
Activity
Cost Pool
Driver
Pool
Rate
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
$4
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
$6
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
$5
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
$5,000
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
$5
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
$1,000
30
$30,000
40
$40,000
$70,000
total
$209,000
$301,000
$510,000
Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
Refer to Figure 4-21. Under this new approach, what is the new pool rate for batch inspection costs?
173. Figure 4-21
Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G.
Information relating to the two products is as follows:
Model F
Model G
Units produced
24,000
30,000
Machine hours
7,500
8,500
Direct labor hours
8,000
12,000
Material handling (number of moves)
4,000
6,000
Setups
5,000
7,000
Purchase orders
30
40
Inspections
10,000
14,000
Product line variations
8
12
The following overhead costs are reported for the following activities of the production process:
Material handling
$ 40,000
Labor-related overhead
120,000
Setups
60,000
Product design
100,000
Batch inspections
120,000
Central purchasing
70,000
Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below:
Activity
Cost Pool
Driver
Pool
Rate
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
$4
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
$6
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
$5
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
$5,000
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
$5
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
$1,000
30
$30,000
40
$40,000
$70,000
total
$209,000
$301,000
$510,000
Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
Refer to Figure 4-21. Under this new approach using the new rates, what are the overhead costs assigned to Model G in this approximately relevant
ABC system?
174. Figure 4-21
Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G.
Information relating to the two products is as follows:
Model F
Model G
Units produced
24,000
30,000
Machine hours
7,500
8,500
Direct labor hours
8,000
12,000
Material handling (number of moves)
4,000
6,000
Setups
5,000
7,000
Purchase orders
30
40
Inspections
10,000
14,000
Product line variations
8
12
The following overhead costs are reported for the following activities of the production process:
Material handling
$ 40,000
Labor-related overhead
120,000
Setups
60,000
Product design
100,000
Batch inspections
120,000
Central purchasing
70,000
Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below:
Activity
Cost Pool
Driver
Pool
Rate
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
$4
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
$6
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
$5
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
$5,000
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
$5
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
$1,000
30
$30,000
40
$40,000
$70,000
total
$209,000
$301,000
$510,000
Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
Refer to Figure 4-21. Using ABC as the benchmark, what is the percentage error in the cost assigned to Model G using the approximately relevant
ABC approach? (round to 4 decimal places)