Problem 17-5B (continued)
4. Pattern alignment $64,400/560 batches $115/batch
Cutting $50,430/12,300 machine hours $4.10/MH
Moving product $100,800/2,400 moves $42/move
Sewing $327,600/4,200 direct labor hours $78/DLH
Pup Tent Pop-Up Tent
Pattern alignment 140 batches x $115..........$ 16,100 420 batches x $115….…....$ 48,300
Cutting 7,000 MH x $4.10..............28,700 5,300 MH x $4.10……..…....21,730
Moving product 800 moves x $42..............33,600 1,600 moves x $42............67,200
Sewing 2,600 DLH x $78…............202,800 1,600 DLH x $78…..…….....124,800
Inspecting 240 insp. x $40................. 9,600 360 insp. x $40…...…..…....14,400
Folding 15,200 units x $2.10.........31,920 7,600 units x $2.10.…….....15,960
DM and DL per unit 25.00 32.00
Mfg. cost per unit $ 58.46 $ 113.87
*rounded
Problem 17-5B (concluded)
5.
Pup Tent Pop-Up Tent
Selling price $65.00 $200.00
Both product lines are profitable without any cost cutting. The ABC cost
assignment method more accurately reflects the costs associated with
6. Departmental overhead rates based on direct labor hours and machine
hours are still volume-based measures and would not improve the
Serial Problem — SP 17
1. Setting up machines Batch level
2. Direct materials $2,500
3. Setting up machines $20,000/25 batches
$800/batch
Inspecting components $7,500/5,000 parts $1.50/part
Providing utilities $10,000/5,000 machine hours $2.00/MH
4. ABC gives a better representation of the cost of producing Job 615
because it reflects the resources consumed in the production
Reporting in Action — BTN 17-1
1. Examples of activities at Apple and Google:
Ordering raw materials
Receiving raw materials
2. Apple is a manufacturing company as it manufactures and sells
products such as iPods, iPads, iPhones, and computers. Apple also
3. Yes. It could be useful for determining the activities that the
companies perform and identifying the costs associated with each
Comparative Analysis — BTN 17-2
1.
APPLE
For Year Ended ($ millions)
Sep. 28,
2013
Sep. 29,
2012
Revenues………………….…………………………………………$170,190 $156,508
GOOGLE
For Year Ended ($ millions)
Dec. 31,
2013
Dec. 31,
2012
Revenues………………….…………………………………………$59,825 $50,175
Google has a higher ratio of expenses to revenues in both years.
2. Google may want to analyze its costs in terms of the activities it is
3. Some activities associated with opening a new retail location include:
Finding property to buy or rent
Building or remodeling
Ethics Challenge — BTN 17-3
1. Employees have the responsibility to be honest when asked for
2. Depending on your position, it may be appropriate to determine if the
redundancy is justified. This would certainly be the responsibility of
3. Your responsibility is to report accurately and objectively. If there are
4. Consider:
Are you being objective?
Is the activity you observed happening on a regular basis, or was
it a one-time occurrence?
Communicating in Practice — BTN 17-4
TO: [Name], CEO
FROM: [Student name], Cost Analyst
RE: Activity Based Costing
Traditional methods of product costing have typically assigned
manufacturing overhead costs based on direct labor hours, direct labor
While the total costs being assigned to products using volume-based
methods may be the same as the costs assigned in activity-base costing,
Traditional methods of cost assignment pool together all the costs other
An advantage of ABC is that it more accurately divides the total costs
Taking It to the Net — BTN 17-5
Activity-based costing is tested on Part 1 “Financial Planning,
Performance, and Control.” Major topics for this part of the exam include
planning, budgeting, and forecasting; performance management, cost
management, internal controls, and professional ethics.
Students wishing to become CMAs should take courses in economics,
financial accounting, management accounting, tax, auditing, quantitative
methods (mathematics, statistics, and operations management), and
finance.
Teamwork in Action — BTN 17-6
Instructor note: Student answers to this problem will depend on the
restaurant visited.
1-2. Filling an order at a typical fast-food establishment may involve
several people:
Someone will take the order and receive payment.
3. Some costs in a fast-food restaurant:
Ingredients
Paper products
Entrepreneurial Decision — BTN 17-7
1. Suja Juice Co. would need to:
Create the product (or contract with someone to do this)
2. Generally, we would want to assign the costs associated with product-
specific activities to the products that consumed them, so we would not
Hitting the Road — BTN 17-8
Refer to the TEAMWORK IN ACTION assignment. Students could make
Global Decision — BTN 17-9
1. Apple’s three largest geographic segments are:
APPLE
Net sales ($ millions) 2013
Americas (North and South America)………………………….$62,739
2. Samsung’s three largest geographic segments are:
SAMSUNG
Net sales* ( millions)₩2013
America…………..………………………….….….…….…….…..69,383,42₩
6
3. Customer service activities likely vary greatly across geographic
markets. While all customers expect good service, differences in
language, cultural customs, business customs and laws, and the