Chapter 19 assignment
.docx
keyboard_arrow_up
School
Rutgers University, Newark *
*We aren’t endorsed by this school
Course
202
Subject
Industrial Engineering
Date
Apr 3, 2024
Type
docx
Pages
7
Uploaded by CaptainScienceArmadillo10 on coursehero.com
Chapter 19 – Cost Management Systems
Single plant-wide overhead pool
Total est. MOH = Allocation rate
Total est. allocation base Where allocation base is either DLH, DL$, or MH
MOH allocated to each product =
Allocation rate x amount of allocation base used
Departmental overhead pools
Total est. MOH in each dept. = Allocation rate
Total est. allocation base for dept. Where allocation base is either DLH, DL$, or MH
MOH allocated to each product =
(Dept. 1 allocation rate x amount of allocation base 1 used) + (Dept. 2 allocation rate x amount of allocation base 2 used) +
Etc.
Activity-based costing (ABC)
o
Step 1: Identify the activities
o
Step 2: Identify the cost drivers and pool the MOH costs
o
Step 3: Compute the cost driver rates
o
Step 4: Assign the costs using ABC
Total est. MOH in each activity pool
= Allocation rate
Total est. cost driver for that pool Examples of cost drivers:
1
Set-up costs
Number of set-ups
Ordering costs
Number of purchase orders
Machining costs
Number of machine hours
Material moving
Number of production runs
MOH allocated to each product =
(Pool 1 allocation rate x amount of cost driver 1 used) +
(Pool 2 allocation rate x amount of cost driver 2 used) + Etc.
Comparing methods
o
Why each method gives a different answer for mfg. costs
o
Advantages and disadvantages of each method
o
Type of firm that would choose each method
Activity-based management
o
Effect of ABC on product pricing: price-takers v. price-setters
o
Effect of ABC on product mix: profitability of each product
o
Effect of ABC on value engineering: eliminating non-value-
added (NVA) costs
Just-in-Time (JIT) management
o
Differences from traditional management
o
Characteristics of JIT
o
Journal entries for JIT
Quality costs
o
What is “quality”
o
Types of quality
Conformance costs:
Prevention
Appraisal
Non-conformance costs:
Internal failure
External failure
o
Preparing and using a Cost of Quality Report
o
Benefits of understanding quality costs
2
Practice Problems for Chapter 19 – Cost Management Systems
1)
Single plant-wide allocation of overhead
XYZ Manufacturing
uses a single plant-wide rate based on DL$ to allocate MOH to its two products:
Basic
Deluxe
Total
Number of units
100,000
40,000
140,000
Product costs:
DM
$1,500,000
$2,400,000
$3,900,000
DL
1,740,000
960,000
2,700,000
MOH
2,430,000
Total cost
$9,030,000
XYZ
Manufacturing
uses a single plant-wide rate based on DL$ to allocate MOH to its two products a)
Compute the plant-wide allocation rate based on DL$ POHR = $0.66 per DL$
b)
Compute the amount of MOH allocated to each product
MOH allocated to Basic = $1,584,000
MOH allocated to Deluxe = $1,782,000
c)
Compute the total cost of each product
Total cost of Basic = $5,484,000
Total cost of Deluxe = $8,382,000
d)
Compute the cost per unit for each product
Cost/unit for Basic = $54.84/unit
Cost/unit for Deluxe = $209.55/unit
3
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help