Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 17
Problem 17-3B (concluded)
4. Cost per unit Holiday Basket Executive Basket
5. Plantwide overhead rate
Wrapping ($300,000 + $200,000) $ 500,000
Assembling 400,000
Product Design 180,000
6.
Holiday Basket Executive Basket
Activity-based cost per unit $14.25 $73.90
Plantwide cost per unit $18.13 $36.25
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 17
Problem 17-4B (30 minutes)
1. Compute overhead allocation rates for each activity
Components $495,000/(450,000 + 100,000) parts $0.90/part
Assign overhead costs to products
Fun with Fractions
Count Calculus
Components
450,000 parts x $0.90
$ 405,000
100,000 parts x $0.90
$ 90,000
Assembly
15,000 DLH x $14.40
2,000 DLH x $14.40
Maintenance
5,000 MH x $14.40
2,000 MH x $14.40
Packaging
150,000 boxes x $2.88
10,000 boxes x $2.88
Shipping
1,500 cartons x $14.40
400 cartons x $14.40
52 set-ups x $1,800
52 set-ups x $1,800
2. Cost per unit Fun with Fractions Count Calculus
Total manufacturing cost $1,240,200 $275,760
3. Selling price of Count Calculus $59.95
4. Since the cost associated with Fun with Fractions is $8.27, the price
should be at least $8.27 to cover these costs. A higher price would
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Problem 17-5B (50 minutes)
Pup Tent Pop-Up Tent
Overhead cost by product line
2. Total manufacturing cost per unit:
3. Gross profit per unit
Selling price per unit $65.00 $200.00
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Problem 17-5B (continued)
4. Compute overhead allocation rates for each activity
Pattern alignment $64,400/560 batches $115/batch
Cutting $50,430/12,300 machine hours $4.10/MH
Assign overhead costs to products
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
1,600 DLH x $78
Inspecting
240 insp. x $40
360 insp. x $40
14,400
Folding
15,200 units x $2.10
31,920
7,600 units x $2.10
15,960
Designing
70 mods. x $1,000
70,000
210 mods. x $1,000
Providing space
4,300 sq. ft. x $6
25,800
4,300 sq. ft. x $6
25,800
Material handling
Total overhead
$622,190
Overhead per unit*
DM and DL per unit
Mfg. cost per unit
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 17
Problem 17-5B (concluded)
5.
Pup Tent Pop-Up Tent
Selling price $65.00 $200.00
6. Departmental overhead rates based on direct labor hours and machine
hours are still volume-based measures and would not improve the
accuracy of cost assignment relative to ABC. Departmental overhead
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 17
Serial Problem — SP 17
1. Setting up machines Batch level
2. Direct materials $2,500
3. Compute overhead allocation rates for each activity
Setting up machines = $20,000/25 batches
= $800/batch
Inspecting components $7,500/5,000 parts $1.50/part
4. ABC gives a better representation of the cost of producing Job 615
because it reflects the resources consumed in the production
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 17
Company Analysis — AA 17-1
1. If overhead is assigned based on sales, the iPhone line would be
assigned the highest amount of overhead costs in 2017.
Comparative Analysis — AA 17-2
1.
APPLE
For Year Ended ($ millions)
Sep. 30, 2017
2.
GOOGLE
For Year Ended ($ millions)
Dec. 31, 2017
3. Google has a higher ratio of costs to revenues in 2017.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 17
Global Analysis — AA 17-3
1. and 2.
SAMSUNG
For Year Ended (millions of Korean won)
Dec. 31
2017
Dec. 31,
201
3. Samsung’s ratio of costs to revenues was higher in 2016.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 17
Ethics Challenge — BTN 17-1
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
4. Consider:
• Are you being objective?
• Is the activity you observed happening on a regular basis, or was
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Communicating in Practice — BTN 17-2
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
than the high-volume, mass-market products require.
Traditional methods of cost assignment pool together all the costs other
than direct materials and direct labor and spread these to products as if all
those costs were consumed by products in the same proportion. When
this assumption is not true, significant distortions in cost assignment may
occur.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 17
Taking It to the Net — BTN 17-3
Activity-based costing is tested on Part 1 “Financial Reporting, Planning,
Performance, and Control.” Major topics for this part of the exam include
external financial reporting decisions; planning, budgeting, and
Teamwork in Action — BTN 17-4
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:
3. Some costs in a fast-food restaurant:
• Ingredients
• Paper products
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Entrepreneurial Decision — BTN 17-5
1. Sycamore Brewing 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 17-6
Refer to the TEAMWORK IN ACTION assignment. Students could make
individual observations about various fast-food restaurants and pool their
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