1-Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following information. Total estimated oh cost for the two product lines are 770,000. Car Truck SOL FOR A) DL.hours for car wheels=40,000*1=40,000
Estimated wheels produced 40,000 30,000 dl hours for t. wheels= 10,000*3=30,000 ( 70,000 tot.dl hours.)
DL Hour per wheels 1 3 770,000/70,000=11$per dl hours. Oh assigned= for car w. 40,000*11=440,000 truck: 30,000*11=330,000 Total OH= 770,000(440,000+330,000)
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b) Assign the manufacturing OH costs for April to the two pro.using activity based costing.
Solution: a) b) for instrmnts: Requisition= 400*40= 16,000 for gauges= 600*40=24,000
T.Cost Assign=40,000 for Inst. Setups= 200*55=11,000 for gauges= 300*55=16,500 sum them up for tca for inst. insp= 200*45=9000 for gauges= 400*45=18,000 sum them up for tca
Units produced= instrument= 50 and gauges 300
OH for per unit= 16,000+11,000+9,000/ 50 and sum of all for gauges/300
4) FireOut, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multipurpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hrs. x (54,000 + 10,200)]. Expected annual manufacturing overhead is $1,557,480. Thus, the predetermined overhead rate is $16.17 or ($1,557,480 ÷ 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models.The company’s managers
1. For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units?
Develop and diagram an activity based cost model using the information in the case. Provide your best estimates about the cost and profitability of Wilkerson’s three product lines. What difference does your cost assignment have on reported product costs and profitability? What causes any shifts in cost and profitability?
Determine the actual costs incurred during the month of May for direct materials, direct labor, and manufacturing overhead.
Company Wide Overhead Rate equal Forecast Overhead divided by Expected Machine Hours Overhead Rate equal $480,000 equal $6 per machine hour 80,000. Company Wide Rate: Direct Material Costs x Batch Size plus Direct Labor Costs x Batch Size Maxiflow: Alaska: 135 x 20 equal 2700 110 x 20 equal 2200 75 x 20 equal 1500 95 x 20 equal 1900 equal $4200 per batch equal $4100 per batch Departmental Rate. Direct Materials Costs plus Direct Labor Costs divided by Each Department Hour Maxiflow: 135 plus 75 equal $210 Radiator Parts Fabrication: 210 divided by 28 equal $7.50 per batch Radiator Assembly, Weld, and Test equal 210 divided by 30 equal $7 per batch Compressor Parts Fabrication: 210 divided by 32 equal $6.60 per batch Compressor Assembly and Test: 210 divided by 26 equal $8.10 per batch Alaska: 110 plus 95 equal 205 Radiator Parts Fabrication: 205 divided by 16 equal $12.80 per batch Radiator Assembly, Weld, and Test: 205 divided by 74 equal $2.70 per batch Compressor Parts Fabrication: 205 divided by 8 equal $25.60 per batch Compressor Assembly and Test: 205 divided by 66 equal $3.10 per batch. There was only a $100 difference between Maxiflow and Alaska when it came to company-wide rates per batch.
Prepare the adjusting entry for manufacturing overhead, assuming the balance is allocated entirely to Cost of Goods Sold.
Glaser Health Products manufactures medical items for the health care industry. Production involves machining, assembly and painting. Finished units are then packed and shipped. The financial controller is interested to introduce an activity-based costing (ABC) system to allocate (or distribute) indirect costs to products. Indirect costs, as distinct from direct costs, cannot be unambiguously linked to specific products. The controller would like to calculate product costs based on ABC for planning and control, not inventory valuation.
Peter’s Peripherals assembles multimedia upgrade kits --- sets of components for adding sound and video to desktop computers. The demand for their kits for the next four quarters is estimated in the table below. Unit manufacturing cost for each kit is $160. Holding costs on each kit is $80 per quarter. Any kit that must be delivered late is assessed a backorder cost of $120. Each worker is capable of finishing 10 kits per quarter. If the company chooses to vary work force levels, it will incur costs of $400 for each additional worker; $600 for each termination. The company currently has 28 employees.
Develop an activity-base cost system for Dakota Office Products based on Year 200 data. Calculate the activity cost-driver rate for each DOP activity in 2000.
b. Use your answer to part A to determine the total annual indirect cost assigned to:
3) Using the budget Data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocate to planned production? What was the actual cost per unit of production and shipping?
production and sales of Product A is 2,000 units and of Product B is 3,000 units. There are three activity cost
b. Use your answer to part A to determine the total annual indirect cost assigned to:
Abby Conroy was tasked with calculating an effective quote for Breeland Ltd., she chose the activity based accounting costing system since it more accurately captures the related costs. A special order was placed by Breeland Ltd. with Ace Fertilizer Company. The did not plan to order more of this product in the future. Based on Ace’s policy, the special order included disposal costs for any used materials in the event no other orders existed for the unused materials at the time the Breeland contract was signed. Abby correctly calculated the total direct material and labor costs and accurately arrived at the indirect costs using the ABC method and used cost activity pools that make sense for the company and
7. Though numbers given in the cost data can not be contested, I would definitely contest the way total cost has been computed. The item 345 department operates within a large manufacturing facility that churns out number of other products too. Hence judging the profitability of item 345 on the basis of total cost is not practical.
The above graph suggests that volume based computation of overhead costs does not reflect the real overhead costs based on actual production per product line (computed maximum in excess over actual). On the other hand, if we follow the allocation of overhead costs based on prime costs as illustrated in Exhibit 2 of the case, we need to consider other quantitative factors: 1. No data is available to determine the amount of raw materials used in producing each of the products. While we can assume that the production of small, colored glass ornaments uses fewer raw materials (e.g. glass) than large, colored glass ornaments, the amount of glass used to produce specialty ornaments cannot be derived from the facts of the case. 2. There is also no data available to determine the number of direct labor hours consumed for producing each product type, although evidently, specialty ornaments use more direct labor hours. Based on the above considerations, we deem it inaccurate to base overhead on prime costs, a common practice in traditional costing. In addition,