Part a.
Estimated
Costs Rate
54,000$ 200 orders 270$ «- Correct!
216,000 100 runs 2,160 «- Correct!
360,000 120,000 pounds 3.00 «- Correct!
288,000 12,000 hours 24 «- Correct!
72,000 45 inspections 1,600 «- Correct!
144,000 480,000 units 0.30 «- Correct!
1,134,000$
1,134,000$
7,500
151.20$
Correct!
Indirect costs
Direct labor
Direct materials
Total cost
Direct materials
Direct labor
Total cost
Part c.
Production costs using ABC
Processing orders
Setting up production
Handling materials
Using machines
Performing quality control
Packing
Indirect costs:
Cost Driver
KITCHEN SUPPLY, INC.
Activity
Driver Units
Problem 09-57
Using machines
Handling materials
Number of runs
Setting up production
Number of orders
Processing orders
Machine hours
Pounds
Total estimated overhead
Packing
Performing quality control
Number of units
Number of inspections
Production costs using direct labor hours
Part b.
Estimated allocation base
Estimated activity
Predetermined rate for direct labor-hour:
Estimated
Estimated Cost
Cost
Driver Activity
54,000$
216,000
360,000
288,000
72,000
144,000
1,134,000$
Number of units produced
Number of inspections
Units shipped
Estimated direct labor-hours for Year 2
Actual labor cost per hour
Direct materials costs
Direct labor-hours
Number of orders
Number of production runs
Pounds of material
Machine-hours
Machine-hours
Pounds of materials used
KITCHEN SUPPLY, INC.
Cost Driver
Recommended
Number of production runs
Number of orders
Processing orders
Machine depreciation and maintenance
Handling materials
12,000 hours
120,000 pounds
100 runs
200 orders
Given Data P09-57:
Cost driver volumes in January, Year 2:
Activity
Year 2 cost estimates:
Setting up production
Total estimated cost
Packing
Performing quality control
45 inspections
480,000 units
Number of units
Number of inspections
Estimated Cost Driver
Cost Activity Rate
Machine hours 4,698,000$ 50,000 93.96$
Correct!
Route 66 Main Street Alley Cat Total
7,600,000 11,200,000 9,500,000 28,300,000
3,000,000 4,800,000 4,000,000 11,800,000
288,000 480,000 1,080,000 1,848,000
939,600 1,503,360 2,255,040 4,698,000
3,372,400 4,416,640 2,164,960 9,954,000
Correct! Correct! Correct!
1,760,000
2,800,000
5,394,000
Correct!
Route 66 Main Street Alley Cat Total
3,308,140 4,495,660 2,150,200 9,954,000
5,394,000
Order processing
Warehousing
Direct costs:
Gross profit
Sales revenue
Energy
Shipping
Contribution margin
Fixed overhead:
Plant administration
Other
Direct material
Direct labor
Variable overhead:
Machine setup
Problem 09-59
PICKLE MOTORCYCLES, INC.
Recommended
Part a.
Compute machine hour rate:
Fixed overhead:
All variable overhead
Income Statement
Pickle Motorcycles, Inc.
Activity
Cost Driver
Direct costs:
Direct material
Direct labor
Variable overhead
Contribution margin
Plant administration
Other
Gross profit
Income Statement
Pickle Motorcycles, Inc.
Part b.
Sales revenue
Route 66 Main Street Alley Cat Total
7,600,000$ 11,200,000$ 9,500,000$ 28,300,000$
3,000,000 4,800,000 4,000,000 11,800,000
288,000 480,000 1,080,000 1,848,000
468,000
1,152,000
1,674,000
756,000
648,000
1,760,000
2,800,000
Fixed overhead
5,394,000$
Setting up machines
Number of production runs
Number of units shipped
Number of units held in inventory
Number of sales orders received
Using energy
Processing orders
Activity Level
Other fixed overhead
Gross profit
Given Data P09-59:
Sales revenue
Direct costs
Direct materials
Direct labor
PICKLE MOTORCYCLES, INC.
Income Statement
Variable overhead
Machine setup
Order processing
Warehousing costs
Energy to run machines
Shipping
Recommended cost allocation bases:
Plant administration
Oval Round Square Total
240,000 240,000 240,000 720,000
45,000 15,000 30,000 90,000
120 450 330 900
750,000 450,000 1,200,000 2,400,000
4,800 2,700 7,500 15,000
6,000 3,000 9,000 18,000
Costs Activity
1,350,000 90,000
1,350,000 900
3,600,000 2,400,000
6,300,000
Correct!
Estimated Cost Driver Burden Rate
Cost Activity per DLH
Labor hours 6,300,000$ 15,000 420.00$
Correct!
Oval Round Square
240,000$ 240,000$ 240,000$
2,016,000 1,134,000 3,150,000
2,256,000$ 1,374,000$ 3,390,000$
6,000 3,000 9,000
376$ 458$ 376.67$
Correct! Correct! Correct!
Estimated
Oval Round Square
2,220,000$ 1,815,000$ 2,985,000$
Pounds of material
Setups
Machine hours
Cost Driver
Material handling
Scheduling and setup
Utilities
Compute cost per unit with ABC
Part d.
Overhead:
Direct Costs
Utilities
Scheduling and Setup
Material handling
Total costs
Pounds of material
Setups
Machine hours
Recommended
Recommended
Direct Costs
Overhead
Total costs
Number of units
Unit cost
Compute Activity-based rates:
Part c.
Scheduling and setup
Utilities
Cost pools
Problem 09-60
CHURCHILL PRODUCTS
Products
Total machine hours
Total direct costs
Budgeted
Part a.
Cost Drivers
Total number of setups
Total pounds of material
Total direct labor hours
Number of units produced
Material handling
Total overhead costs
Total overhead
Compute overhead rate per labor hour:
Activity
Cost Driver
Compute cost per unit:
Costs
1,350,000$ 90,000
1,350,000 900
3,600,000 2,400,000
Oval Round Square
240,000$ 240,000$ 240,000$
45,000 15,000 30,000
Number of units produced
Total direct labor-hours
Total pounds of material
Total number of setups
Given Data P09-60:
Drivers
Activity
Products
CHURCHILL PRODUCTS
Next year’s plans and budget:
Scheduling and setup
pounds of material
setups
machine-hours
Cost Pools
Overhead cost pools:
Utilities
Material handling
Total machine-hours
Total direct costs (material and labor)
M3100 M4100 M6100
10 20 20
180 400 220
100 200 100
6,000 9,000 10,000
10,000 17,500 10,000
Compute machine hour rate:
Estimated Cost Driver
Cost Activity Rate
Machine hours 8,700,000$ 25,000 348.00$
Correct!
M3100 M4100 M6100 Total
9,000,000$ 15,000,000$ 13,500,000$ 37,500,000$
3,000,000 4,500,000 3,300,000 10,800,000
600,000 900,000 1,800,000 3,300,000
2,088,000 3,132,000 3,480,000 8,700,000
3,312,000$ 6,468,000$ 4,920,000$ 14,700,000$
Correct! Correct! Correct! 6,000,000
8,700,000$
Correct!
Activity Unit
M3100 M4100 M6100 Total
9,000,000$ 15,000,000$ 13,500,000$ 37,500,000$
MTI
Income Statement
Processing sales orders
Units shipped
Machine hours
Units held in inventory
Sales orders received
Production runs
Setting up machines
Warehousing
Operating machines
Shipping
Sales revenue
Direct costs:
Direct material
Direct labor
Variable overhead:
Setting up machines
Processing orders
Warehousing
Operating machines
Shipping
Cost Driver
Activity
Sales revenue
Direct costs:
Contribution margin
Plant administration
Compute Activity-based rates:
Part b.
Units held in inventory
Sales orders received
Production runs
Cost Driver
MTI
Warehousing
Problem 09-67
Units shipped
Machine hours
MTI
Recommended
Cost Driver
Activity Level
Recommended
Activity
Part a.
Processing sales order
Setting up machine
Gross profit
Operating machine
Shipping
All variable overhead
Activity
Income Statement
Direct material
Direct labor
Variable overhead
3,387,000$ 5,688,000$ 5,625,000$ 14,700,000$
Plant Administration
Gross profit
Contribution margin
M3100 M4100 M6100 Total
9,000,000$ 15,000,000$ 13,500,000$ 37,500,000$
3,000,000 4,500,000 3,300,000 10,800,000
600,000 900,000 1,800,000 3,300,000
2,400,000
1,800,000
2,400,000
1,200,000
900,000
14,700,000
6,000,000
8,700,000$
M3100 M4100 M6100 Total
10,000 17,500 10,000 37,500
Operating machines
Processing sales orders
Sales orders received
Shipping
Income Statement
MTI
Given Data P9-67:
Sales revenue
Direct costs:
Direct materials
Direct labor
Variable overhead:
Setting up machines
Processing sales orders
Warehousing
Operating machines
Contribution margin
Plant administration
Gross profit
Units produced last year:
Employee team recommendations: