Case 05-68 Student Name:
Class:
1. Explain how activity-based costing differs from traditional product-
costing methods.
2. Cincinnati Cycle Company
Activity Cost Pools and Pool Rates
Material handling *
Overhead increase rate *
Total activity cost pool *
JY-63 parts X units *
RX-67 parts X units *
Pool rate per part *
Inspection *
Overhead increase rate *
Total activity cost pool *
JY-63 inspection hours *
RX-67 inspections hours *
Pool rate per inspection hour *
Machining *
Overhead increase rate *
Total activity cost pool *
JY-63 machine hours *
RX-67 machine hours *
Pool rate per machine hour *
Assembly *
Overhead increase rate *
Total activity cost pool *
JY-63 assembly hours *
RX-67 assembly hours *
Pool rate per assembly hour *
3. Cincinnati Cycle Company
Estimated Product Costs
JY-63 RX-67
Estimated Estimated
20×4 20×5 20×4 20×5
Cost Product Cost Product
Data Cost Data Cost
Direct material:
No cost increase * *
Direct labor:
Direct labor * *
Percentage cost increase * * *
Material handling:
Number of parts * *
sales in hours * *
* *
$ per unit * * *
Inspection:
Inspection hours * *
$ per hour * * *
Machining:
Machining activity in hours * *
$ per hour * * *
Assembly:
Assembly activity in hours * *
$ per hour * * *
Total cost * *
4. Cincinnati Cycle Company
Budgeted Statement of Gross Margin for 20×5
JY-63 RX-67 Total
Sales revenue * * *
Cost of goods manufactured and sold:
Beginning finished-goods inventory * * *
Add: Direct material * * *
Direct labor * * *
Material handling * * *
Inspection * * *
Machining * * *
Assembly * * *
Cost of goods available for sale * * *
Less: Ending finished-goods inventory* * * *
Cost of goods sold * * *
Operating margin * * *
*Ending finished-goods inventory
JY-63
Total product cost *
Units produced *
Ending inventory in units *
Ending finished-goods inventory *
RX-67
Total product cost *
Units produced *
Ending inventory in units *
Ending finished-goods inventory *
Case 05-68 Student Name:
Class:
1. Explain how activity-based costing differs from traditional product-
costing methods.
2.
Cincinnati Cycle Company
Activity Cost Pools and Pool Rates
Material handling 113,208$
Inspection 235,850$
Overhead increase rate 1.06
Machining 849,056$
Overhead increase rate 1.06
3.
Cincinnati Cycle Company
Estimated Product Costs
JY-63 RX-67
Estimated Estimated
20×4 20×5 20×4 20×5
Cost Product Cost Product
Data Cost Data Cost
Direct material:
No cost increase 2,000,000$ 3,500,000$
Direct labor:
Direct labor 370,370$ 185,186$
Instructor
McGraw-Hill/Irwin
Activity-based costing (ABC) differs from traditional costing in that it focuses on activities that consume
4.
Cincinnati Cycle Company
Budgeted Statement of Gross Margin for 20×5
JY-63 RX-67 Total
Cost of goods manufactured and sold:
Beginning finished-goods inventory 480,000$ 600,000$ 1,080,000$
Add: Direct material 2,000,000 3,500,000 5,500,000
*Ending finished-goods inventory
JY-63
Total product cost 3,080,000$
Units produced 5,000