Lion Corporation uses an activity-based costing system to assign overhead coststo products. In the first stage, two overhead costs--equipment depreciation andsupervisory expense-are allocated to three activity cost pools--Machining, OrderFilling, and Other--based on resource consumption. Data to perform theseallocations appear below:Overhead costs:EquipmentdepreciationSupervisoryexpenseEquipmentdepreciationDistribution of Resource Consumption Across Activity Cost Pools:Product C9$ 47,000Product UO$ 6,000TotalSupervisory expense 0.60Activity Cost PoolsO $18.00 per MHO $5.30 per MHO $2.82 per MHO $3.18 per MHMac0.60In the second stage, Machining costs are assigned to products using machine-hours (MHS) and Order Filling costs are assigned to products using the numberof orders. The costs in the Other activity cost pool are not assigned to products.Activity data for the company's two products follow:6,900OrderFilling3,1000.10MHS(Machining)10,000b.20200Other8000.30Orders (OrderFilling)1,0000.20The activity rate for the Machining activity cost pool under activity-basedcosting is closest to:

Steps to compute the cost of a product under Activity Based Costing:- Allocate overhead cost to…

Lion Corporation uses an activity-based costing system to assign overhead costs to products. In the first stage, two overhead costs--equipment depreciation and supervisory expense-are allocated to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Overhead costs: Equipment depreciation Supervisory expense Equipment depreciation $ 47,000 Distribution of Resource Consumption Across Activity Cost Pools: $6,000 Product C9 Activity Cost Pools Machining 0.60 Order Filling 0.10 Supervisory expense 0.60 In the second stage, Machining costs are assigned to products using machine- hours (MHS) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow: 0.20 MHS (Machining) 6,900 Other 0.30 200 0.20 Orders (Order Filling)

Lion Corporation uses an activity-based costing system to assign overhead costs to products. In the first stage, two overhead costs--equipment depreciation and supervisory expense-are allocated to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Overhead costs: Equipment depreciation Supervisory expense Equipment depreciation $ 47,000 Distribution of Resource Consumption Across Activity Cost Pools: $6,000 Product C9 Activity Cost Pools Machining 0.60 Order Filling 0.10 Supervisory expense 0.60 In the second stage, Machining costs are assigned to products using machine- hours (MHS) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow: 0.20 MHS (Machining) 6,900 Other 0.30 200 0.20 Orders (Order Filling)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 10MC: What is the proper order of tasks In an ABC system? identify the cost drivers, assign the costs to...

See similar textbooks

Similar questions

Customs has three cost pools and an associated cost driver to allocate the costs to the product. The cost pools, cost driver, estimated overhead, and estimated activity for the cost pool are: What is the predetermined overhead rate for each activity?
Carltons Kitchens three cost pools and overhead estimates are as follows: Compare the overhead allocation using: A. The traditional allocation method B. The activity-based costing method (Hint: the traditional method uses machine hours as the allocation base.)
The following items are associated with a traditional cost accounting information system, an activity-based cost accounting information system, or both (that is, some elements are common to the two systems): a. Usage of direct materials b. Direct materials cost assigned to products using direct tracing c. Direct labor cost incurrence d. Direct labor cost assigned to products using direct tracing e. Setup cost incurrence f. Setup cost assigned using number of setups as the activity driver g. Setup cost assigned using direct labor hours as the activity driver h. Cost accounting personnel i. Submission of a bid, using product cost plus 25 percent j. Purchasing cost incurrence k. Purchasing cost assigned to products using direct labor hours as the activity driver l. Purchasing cost assigned to products using number of orders as the activity driver m. Materials handling cost incurrence n. Materials handling cost assigned using the number of moves as the activity driver o. Materials handling cost assigned using direct labor hours as the activity driver p. Computer q. Costing out of products r. Decision to continue making a part rather than buying it s. Printer t. Customer service cost incurred u. Customer service cost assigned to products using number of complaints as the activity driver v. Report detailing individual product costs w. Commission cost x. Commission cost assigned to products using units sold as the activity driver y. Plant depreciation z. Plant depreciation assigned to products using direct labor hours Required: 1. For each cost system, classify the relevant items into one of the following categories: a. Interrelated parts b. Processes c. Objectives d. Inputs e. Outputs f. User actions 2. Explain the choices that differ between the two systems. Which system will provide the best support for the user actions? Explain. 3. Draw an operational model that illustrates each cost accounting systemwith the items that belong to the system used as examples for each component of the model. 4. Based on the operational models, comment on the relative costs and benefits of the two systems. Which system should be chosen?
Which of the following is the step in which materials, labor, and overhead are detailed? A. determining the units to which costs are assigned B. determining the equivalent units of production C. determining the cost per equivalent units D. allocating the costs to the units transferred out and the units partially completed
Which is not a step In activity-based costing? A. identify the activities performed by the organization B. identify the cost driver(s) associated with each activity C. compute a cost rate per production D. assign costs to products by multiplying the cost driver rate by the volume of the cost driver units consumed by the product
The second stage of customer-based activity-based costing entails the assignment of: a. resource costs to sales departments. b. resources costs to distribution channels. c. customer-related activity costs to products. d. customer-related activity costs to customers.
Rex Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are: Compute the overhead rate for each activity.
Rocks Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are: Compute the overhead rate for each activity.
Activity-based management includes both process value analysis and activity-based costing. Which of the following features is primarily associated with process value analysis? a. Defining root causes of each activity b. Identifying cost objects and activity drivers c. Calculating activity rate d. Assigning costs to cost objects
Trail Outfitters has this information for its manufacturing: Its income statement under absorption costing is as follows: Prepare an income statement with variable costing and a reconciliation statement between both methods.
Under absorption costing, a unit of product includes which costs? A. direct material, direct labor, and manufacturing overhead B. direct material, direct labor, and variable manufacturing overhead C. direct material, direct labor, and fixed manufacturing overhead D. direct material, direct labor, and all variable manufacturing overhead
Overhead costs are assigned to each product based on __________________. A. the proportion of that products use of the cost driver B. a predetermined overhead rate for a single cost driver C. price of the product D. machine hours per product