Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
1093
Exercise 17-22 (10 minutes)
Activity
Level
1.
Registering patients ………………………………………………
Unit
2.
Cleaning beds ……………………………………………………….
3.
Facility
4.
Batch
5.
Ordering medical equipment …………………………………
Facility
6.
Heating the clinic ………………………………………………….
Facility
7.
Facility
8.
Exercise 17-23 (10 minutes)
1. Compute overhead activity rates
Activity
Budgeted Cost
Budgeted Activity Usage
Activity Rate
2. Allocate overhead cost to job based on actual activity usage
Activity
Activity Usage
Allocated Cost
Client consultation…….
45 contact hours
$ 8,100
$27,650
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
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Exercise 17-24 (20 minutes)
1. Compute activity rates using activity-based costing
Activity
Budgeted Cost
Budgeted Activity Usage
Activity Rate
Clerical support………..
$63,000
360 documents
$175 per doc.
2. Allocate overhead costs to litigation using activity-based costing
Activity
Activity Usage
Activity Rate
Allocated Cost
Clerical support ……………….
192 docs.
$175 per doc.
$ 33,600
Client consultations …………
30 dates
Allocate overhead costs to mediation using activity-based costing
Activity
Activity Usage
Activity Rate
Allocated Cost
Clerical support ……………….
168 docs.
$175 per doc.
$29,400
1,600 BH
Client consultations …………
6 dates
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
1095
Exercise 17-25 (10 minutes)
1.
Profitability Report
Western College
Eastern Technical
Sales …………………………………….
$100,000
$80,000
Cost of goods sold ………………..
70,000
55,000
10,000
2,500
2. Eastern. Eastern Technical produces the highest income after including
customer service costs.
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
1096
Exercise 17-26 (20 minutes)
1. Compute overhead activity rates
Activity
Budgeted Cost
Budgeted Activity Usage
Activity Rate
Fabrication …………
$80,000
1,600 machine hours
$50 per MH
6,000 units inspected
2. Allocate overhead to Job 101 based on actual activity usage
Activity
Activity Usage
Activity Rate
Allocated Cost
Fabrication ……………
25 MH
$50 per MH
$1,250
10 units
3. Complete the profitability report for Job 101 (amounts computed are
shaded)
Profitability Report—Job 101
Sales ………………………………………
$8,500
Cost of goods sold …………………
Gross profit …………………………...
Customer service costs ………….
Customer income……………………
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
1097
PROBLEM SET A
Problem 17-1A (30 minutes)
2. Allocate overhead using plantwide overhead rate
Plantwide Overhead
Rate
Direct Labor Hours
per Unit
Overhead
Allocated
3. Compute overhead activity rates
Activity
Budgeted Cost
Budgeted Activity Usage
Activity Rate
Assembly …………..
$390,000
13,000 DLH
$30 per DLH
4. Allocate overhead to Job 31 based on actual activity usage
Activity
Activity Rate
Allocated Cost
Assembly …………
$30 per DLH
$6,000
Product design ….
$60 per EH
$125 per setup
Total ………………..
$8,160
Allocate overhead to Job 42 based on actual activity usage
Activity
Activity Rate
Allocated Cost
Assembly …………
$30 per DLH
$14,400
Product design ….
$60 per EH
$125 per setup
Total ………………..
$17,190
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
1098
Problem 17-2A (20 minutes)
1. Plantwide overhead rate = $252,000 = $6 per direct labor hour
42,000 DLH
2. Compute overhead cost per unit
Plantwide
Overhead Rate
Direct Labor
Hours per Unit
Overhead Cost
per Unit
3. Compute product cost per unit
Per Unit
Direct
Materials
Direct
Labor
Overhead
Cost per Unit
Product Cost
per Unit
4. Compute gross profit (selling price per unit minus product cost per unit)
Per Unit
Selling Price
Product Cost
Gross Profit
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
1099
Problem 17-3A (30 minutes)
1. Compute overhead activity rates
Activity
Budgeted Cost
Budgeted Activity Usage
Activity Rate
Assembly ………………….
$168,000
42,000 DLH
$4 per DLH
Materials purchasing …..
2. Allocate overhead to Pup tent and compute overhead per unit
Activity
Activity Usage
Activity Rate
Allocated Cost
Assembly …………………….
30,000 DLH
$4 per DLH
$120,000
Electricity …………………….
4,000 MH
$2.40 per MH
9,600
Materials purchasing ………
150 PO
$150 per PO
Overhead cost per unit …..
Allocate overhead to Pop–up tent and compute overhead per unit
Activity
Activity Usage
Activity Rate
Allocated Cost
Assembly …………………….
12,000 DLH
$4 per DLH
$ 48,000
Electricity …………………….
6,000 MH
$2.40 per MH
Materials purchasing ………
250 PO
$150 per PO
6,000
Overhead cost per unit …..
3. Compute product cost per unit
Per Unit
Direct
Materials
Direct
Labor
Overhead
Product Cost
per Unit
Pop-up tent ………….
4. Compute gross profit (selling price per unit minus product cost per unit)
Per Unit
Selling Price
Product Cost
Gross Profit
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
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Problem 17-4A (25 minutes)
1. Fabricating departmental overhead rate = $100,000 = $12.50 per MH
8,000 MH
2. Overhead cost per unit using departmental overhead rates
Voltage
EasyRider
Department
Departmental
Overhead Rate
Hours
per Unit
Overhead
Allocated
Hours per
Unit
Overhead
Allocated
3. Product cost per unit using departmental overhead rates
Per Unit
Direct
Materials
Direct
Labor
Overhead
Product Cost
per Unit
Voltage ………
EasyRider ….
4. Gross profit per unit (selling price per unit minus product cost per unit)
Per Unit
Selling Price
Product Cost
Gross Profit
Voltage ………
$260
$235.00
$25.00
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
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Problem 17-5A (25 minutes)
1. Compute overhead activity rate for each activity
Activity
Budgeted Cost
Budgeted Activity Usage
Supplies ……………..
$200,000
1,000 hours
Patient services …..
500 patients
2,000 sq. ft.
2. Allocate costs to each surgical unit using activity-based costing
GENERAL SURGERY
Activity Usage
Activity Rate
Allocated Cost
Supplies …………………………..
250 hours
$200 per hr.
$ 50,000
Patient services. ………………..
400 patients
$75 per patient
30,000
720 sq. ft.
$150 per sq. ft.
108,000
Total allocated cost ……………
$188,000
ORTHOPEDIC SURGERY
Activity Usage
Activity Rate
Allocated Cost
Supplies …………………………..
750 hours
$200 per hr.
$150,000
Patient services. …………………
100 patients
$75 per patient
7,500
1,280 sq. ft.
$150 per sq. ft.
192,000
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
1102
PROBLEM SET B
Problem 17-1B (30 minutes)
2. Allocate overhead to jobs using plantwide overhead rate
Plantwide Overhead
Rate
Machine Hours per
Unit
Overhead
Allocated
3. Compute overhead activity rates
Activity
Budgeted Cost
Budgeted Activity Usage
Activity Rate
Assembly …………….
$500,000
12,500 MH
$40 per MH
$50 per EH
4. Allocate overhead to Job 55 based on actual activity usage
Activity
Activity Usage
Activity Rate
Allocated Cost
Assembly ……………….
150 MH
$40 per MH
$6,000
Total ………………………
$7,742
Allocate overhead to Job 66 based on actual activity usage
Activity
Activity Usage
Activity Rate
Allocated Cost
Assembly ………………
220 MH
$40 per MH
$ 8,800
8 inspections
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
1103
Problem 17-2B (20 minutes)
2. Compute overhead cost per unit
Plantwide
Overhead Rate
Direct Labor
Hours per Unit
Overhead Cost
per Unit
Extra Fine ………..
3. Compute product cost per unit
Per Unit
Direct
Materials
Direct
Labor
Overhead
Cost per Unit
Product Cost
per Unit
Extra Fine ………….
4. Compute gross profit (selling price per unit minus product cost per unit)
Per Unit
Selling Price
Product Cost
Gross Profit
Extra Fine ………..
$64
$62.00
$2.00
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 17
1104
Problem 17-3B (30 minutes)
1. Compute overhead activity rates
Activity
Budgeted Cost
Budgeted Activity Usage
Activity Rate
Mixing …………………….
$160,000
40,000 DLH
$4 per DLH
$2.20 per MH
490 inspections
2. Allocate overhead to Extra Fine and compute overhead per unit
Activity
Activity Usage
Allocated Cost
Mixing ………………………
28,000 DLH
$112,000
Electricity …………………
6,000 MH
13,200
Allocate overhead to Family Style and compute overhead per unit
Activity
Activity Usage
Allocated Cost
Mixing ……………………..
12,000 DLH
$ 48,000
Electricity ………………..
4,000 MH
3. Compute product cost per unit
Per Unit
Direct
Materials
Direct
Labor
Overhead
Product Cost
per Unit
Extra Fine …………..
Family Style ……….
4. Compute gross profit (selling price per unit minus product cost per unit)
Per Unit
Selling Price
Product Cost
Gross Profit
Extra Fine ………..
$64
$63.00
$1.00
Family Style …….