175. 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
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
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 consumption ratios for labor related and batch inspections, what set of equations would be used
to create equally accurate reduced ABC allocation rates (where a = labor hours and b = batch inspections)? (round to 5 decimal places)
176. 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
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
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 the equally accurate reduced ABC system, using consumption ratios for labor related and batch inspections, what
allocation rate would be used to assign labor related costs? (round to 5 decimal places)
177. 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
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
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 the equally accurate reduced ABC system, what are the global consumption ratios for Model F and Model G
178. 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
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
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 the equally accurate reduced ABC system, using consumption ratios for labor related and batch inspections, the
overhead assigned to labor related activities would be? (round to 5 decimal places)
179. 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
Model F
Activity
Model F Cost
Model G Activity
Model G Cost
Total
Material handling
$40,000
10,000
4,000
$16,000
6,000
$24,000
$40,000
Labor related
overhead
$120,000
20,000
8,000
$48,000
12,000
$72,000
$120,000
Setups
$60,000
12,000
5,000
$25,000
7,000
$35,000
$60,000
Product design
$100,000
20
8
$40,000
12
$60,000
$100,000
Batch inspections
$120,000
24,000
10,000
$50,000
14,000
$70,000
$120,000
Central purchasing
$70,000
70
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 equally accurate reduced ABC system, using consumption ratios for labor related and batch inspections, the overhead
cost assigned to Model F would be? (round to 5 decimal places)
180. The collected data sets that are organized and interrelated for use by an organization’s ABC information
system is(are):
181. Figure 4-22
The Wellness Clinic is considering a time-driven activity based costing system. Given the following data:
Resources
Activities
time/activity
supervision
$ 60,000
treating patients
1.40 hr.
supplies and uniforms
$ 80,000
providing hygienic care
1.00 hr
salaries
$350,000
responding to requests
0.60 hr
computer
$ 10,000
monitoring patients
1.00 hr
monitor
$ 25,000
Total
$525,000
Total nursing hours
(practical capacity)
15,000
Refer to Figure 4-22. What is the capacity cost rate?
182. Figure 4-22
The Wellness Clinic is considering a time-driven activity based costing system. Given the following data:
Resources
Activities
time/activity
supervision
$ 60,000
treating patients
1.40 hr.
supplies and uniforms
$ 80,000
providing hygienic care
1.00 hr
salaries
$350,000
responding to requests
0.60 hr
computer
$ 10,000
monitoring patients
1.00 hr
monitor
$ 25,000
Total
$525,000
Total nursing hours
(practical capacity)
15,000
Refer to Figure 4-22. What is the activity rate for treating patients?
183. Figure 4-22
The Wellness Clinic is considering a time-driven activity based costing system. Given the following data:
Resources
Activities
time/activity
supervision
$ 60,000
treating patients
1.40 hr.
supplies and uniforms
$ 80,000
providing hygienic care
1.00 hr
salaries
$350,000
responding to requests
0.60 hr
computer
$ 10,000
monitoring patients
1.00 hr
monitor
$ 25,000
Total
$525,000
Total nursing hours
(practical capacity)
15,000
Refer to Figure 4-22. What is the activity rate for responding to requests?
184. The grouping of logically related information is called:
185. Which of the following statements is TRUE?
186. In an approximately relevant ABC system
187. In the time-driven ABC systems, managers
188. In a time-driven ABC system, once the managers determine the cost of per time unit of supplying
resources to activities, the next step would be
189. If operations run on less than full capacity, what is the result on cost driver rates?
190. Which of the following is NOT an advantage of a time-driven ABC system?
191. The Roanoke plant of the Virginia Company has two production departments: Extrusion and Assembly.
The plant produces two products: P and Q. Cost information for the production departments is given below:
Extrusion
$360,000
Assembly
750,000
The following table presents activity information about the departments and products:
Extrusion
Assembly
Total
Direct labor hours:
P
10,000
20,000
30,000
Q
10,000
30,000
40,000
Total
20,000
50,000
70,000
Machine hours:
P
5,000
1,000
6,000
Q
15,000
2,000
17,000
Total
20,000
3,000
23,000
Required:
a.
Compute the predetermined overhead rate for each department if Extrusion uses machine hours and Assembly uses labor hours.
b.
Calculate the per unit overhead rate for each product if 80,000 units of P were produced and 90,000 units of Q were produced.
a.
Extrusions
$ 360,000
Machine hours
20,000
Overhead rate
Assembly
750,000
Labor hours
50,000
Overhead rate
b.
P
Q
units produced
80,000
90,000
overhead applied to production
Extrusion:
$18 x 5000
$ 90,000
$18 x 15,000
$270,000
Assembly
$15 x 20,000
$300,000
Total
$390,000
$720,000
Overhead per Unit
$4.875
$8
192. Lavender Company has decided to use a predetermined rate to assign factory overhead to production. The
following predictions have been made for 2014:
Total factory overhead costs
$150,000
Direct labor hours
40,000 hours
Direct labor costs
$200,000
Machine hours
60,000 hours
Required:
a.
Compute the predetermined factory overhead rate under three different bases: (1) direct labor hours, (2) direct labor costs, and (3) machine
hours.
b.
Assume that actual factory overhead was $152,500 and that Lavender elected to apply factory overhead to Work in Process based on direct
labor hours. If actual direct labor was 42,000 hours for 2014, was factory overhead overapplied or underapplied? By how much?
c.
Lavender Company follows the policy of writing off any under- or overapplied factory overhead balance to Cost of Goods Sold at the end
of the year. Make the entry necessary at the end of 2014 to dispose of the factory overhead balance determined in Part (b).
(1) Direct labor hours: ($150,000/40,000 hours) = $3.75 per DLH
(2) Direct labor costs: ($150,000/$200,000) = 75% of DLC
(3) Machine hours: ($150,000/60,000 hours) = $2.50 per MH
Overhead applied (42,000 ´ $3.75)
$157,500
Actual overhead
152,500
Overapplied overhead by
$ 5,000
Factory Overhead
5,000
Cost of Goods Sold
5,000
193. The Custom Guitar Company uses a predetermined overhead rate of $5 per machine hour to apply
overhead. During the year, 32,500 machine hours were worked. Actual manufacturing overhead cost for the
year was $187,500. Company records showed the following account balances at the end of the year:
Materials
$ 22,500
Work in process
37,500
Finished goods
50,000
Cost of goods sold
112,500
Required:
a.
Determine the amount of underapplied or overapplied overhead.
b.
Assuming the amount of underapplied or overapplied overhead is material, determine underapplied or overapplied overhead that would be
allocated to the following accounts if the allocation is made using ending account balances:
Work in Process
Finished Goods
Cost of Goods Sold
c.
Assuming the amount of underapplied or overapplied overhead is material, calculate the new balance of the following accounts after
underapplied or overapplied overhead has been allocated:
Work in Process
Finished Goods
Cost of Goods Sold
d.
Determine the balance of Cost of Goods Sold if underapplied or overapplied overhead is immaterial.
$25,000 underapplied
$187,500 – ($5 ´ 32,500)
b.
Work in Process, $4,687.50
$25,000 ´ ($37,500/$200,000)
Finished Goods, $6,250.00
$25,000 ´ ($50,000/$200,000)
Cost of Goods Sold, $14,062.50
$25,000 ´ ($112,500/$200,000)
c.
Work in Process, $42,187.50 = $37,500 + $4687.50
Finished Goods, $56,250 = $50,000 + $6,250
Cost of Goods Sold, $126,562.50 = $112,500 + $14,062.50
d.
$137,500 = $112,500 + $25,000
194. The Anchorage plant of the Tundra Company produces two calculators and has two production
departments: assembly and packaging. Information for the products is given below:
Deluxe
Regular
Total
Units produced
20,000
200,000
Prime costs
$160,000
$1,500,000
$1,660,000
Direct labor hours
20,000
160,000
180,000
Number of setups
60
40
100
Machine hours
10,000
80,000
90,000
Inspection hours
2,000
16,000
18,000
Number of moves
180
120
300
The following table presents activity information about the departments and products:
Assembly
Packaging
Total
Direct labor hours:
Deluxe
10,000
10,000
20,000
Regular
150,000
10,000
160,000
Total
160,000
20,000
180,000
Machine hours:
Deluxe
2,000
8,000
10,000
Regular
8,000
72,000
80,000
Total
10,000
80,000
90,000
Overhead Costs:
Setting equipment
$120,000
$ 120,000
$240,000
Moving material
60,000
60,000
120,000
Machining
20,000
180,000
200,000
Inspection
16,000
144,000
160,000
Total
$216,000
$504,000
$720,000
Required:
a.
Compute the predetermined overhead rate for each department if Assembly uses labor hours and Packaging uses machine hours.
b.
Calculate the per unit cost for each product if departmental overhead rates are used. (Round to 2 decimal places)
c.
Compute the predetermined plant-wide overhead rate based on direct labor hours.
d.
Calculate the per unit cost of each product if a plantwide overhead rate is used.(Round to 2 decimal places)
e.
Calculate the overhead rates for each overhead activity.
f.
Calculate the per unit cost of each product if activity rates are used to assign overhead.
(Round to 2 decimal places)
a.
Assembly
$ 216,000
Labor hours
160,000
Overhead rate
$1.35
Packaging
$504,000
Machine hours
80,000
Overhead rate
$6.30
Units
20,000
200,000
Overhead applied to production
Assembly:
$1.35 ´ 10,000
13,500
Packaging
$6.30 ´ 8,000
50,400
$6.30 ´ 72,000
453,600
Overhead per Unit
$11.20
$10.78
Prime costs
$160,000
$1,500,000
Overhead costs
$4 ´ 20,000
80,000
Total costs
$240,000
$ 2,140,000
Unit cost
$10.70
Setting up equip
$240,000
$2,400 per setup
Machining
$200,000
90,000
$2.22 machine hour
Inspecting
$160,000
18,000
$8.89 per inspection hours
Units
20,000
200,000
Prime costs
$160,000
$1,500,000
$2,400 ´ 60
144,000
$2400 ´ 40
96,000
Moving materials
$400 ´ 120
48,000
Machining
$2.22 ´ 10,000
22,200
Inspecting
$8.89 ´ 2000
17,780
$8.89 ´ 16,000
142,240
Unit cost
$20.80
$9.82
195. Tusker Corporation manufactures two products (S and T). The overhead costs have been divided into four
cost pools that use the following activity drivers:
Number of
Number of
Machine
Packing
Product
Setups
Orders
Hours
Orders
S
20
35
1,000
75
T
5
70
1,500
125
Cost per pool
$15,000
$8,400
$120,000
$40,000
Required:
a.
Compute the allocation rates for each of the activity drivers listed.
b.
Allocate the overhead costs to Products S and T using activity-based costing.
c.
Compute the overhead rate using machine hours under the functional-based costing system.
d.
Allocate the overhead costs to Products S and T using the functional-based costing system overhead rate calculated in part (c).
Number of
Number of
Machine
Packing
Setups
Orders
Hours
Orders
Cost per pool
$15,000
$8,400
$120,000
$40,000
Allocation rate
$ 600
$ 80
$ 48
$ 200
b.
Product S
Product T
Number of setups
$12,000
$ 3,000
Number of orders
2,800
5,600
Machine hours
1,000 ´ $48 =
48,000
1,500 ´ $48 =
72,000
Packing orders
15,000
125 ´ $200 =
25,000
c.
($15,000 + $8,400 + $120,000 + $40,000)/2,500 = $73.36 per MH
d.
Product S: 1,000 ´ $73.36 = $73,360
Product T: 1,500 ´ $73.36 = $110,040