Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. Zachary Company makes two types of circuit boards. One is a high-caliber board designed to accomplish the most demanding tasks;the other is a low-caliber board designed to provide limited service at an affordable price. During its most recent accounting period,Zachary incurred $360,000 of inspection cost. Zachary recently established an activity-based costing system that classifies itsactivities into four categories. Categories and appropriate cost drivers follow:High caliberLow caliberTotalDirect Labor Number ofHoursBatches3,000363615,00018,00072(a) Unit-level activities(b) Batch-level activities(c) Product-level activities(d) Facility-level activitiesAllocated CostNumber ofInspectorsRequiredAllocate the inspection cost between the two products assuming that it is driven by (a) unit-level activities, (b) batch-level activities, (c)product-level activities, or (d) facility-level activities. Note that each allocation represents a separate alternative. In other words, the$360,000 of inspection cost will be allocated four times, once for each cost driver. (Do not round intermediate calculations.)High-CaliberBoards$4960,000Number ofSquare Feet75,000105,000180,000Low-CaliberBoards

The process of methodically and rationally allocating a part of a shared or indirect cost to a…

achary Company makes two types of circuit boards. One is a high-caliber board design e other is a low-caliber board designed to provide limited service at an affordable pric achary incurred $360,000 of inspection cost. Zachary recently established an activity- ctivities into four categories. Categories and appropriate cost drivers follow: High caliber Low caliber Total Direct Labor Number of Batches 36 36 72 Hours 3,000 15,000 18,000 Number of Inspectors 5 4 9 Number of Square Feet 75,000 105,000 180,000

achary Company makes two types of circuit boards. One is a high-caliber board design e other is a low-caliber board designed to provide limited service at an affordable pric achary incurred $360,000 of inspection cost. Zachary recently established an activity- ctivities into four categories. Categories and appropriate cost drivers follow: High caliber Low caliber Total Direct Labor Number of Batches 36 36 72 Hours 3,000 15,000 18,000 Number of Inspectors 5 4 9 Number of Square Feet 75,000 105,000 180,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 22E: Silven Company has identified the following overhead activities, costs, and activity drivers for the...

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Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is currently produced internally. The supplier has offered to sell the track assembly for 66 per unit. Brees is currently using a traditional, unit-based costing system that assigns overhead to jobs on the basis of direct labor hours. The estimated traditional full cost of producing the track assembly is as follows: Prior to making a decision, the companys CEO commissioned a special study to see whether there would be any decrease in the fixed overhead costs. The results of the study revealed the following: 3 setups1,160 each (The setups would be avoided, and total spending could be reduced by 1,160 per setup.) One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is 12,300 and could be totally avoided if the part were purchased. Engineering work: 470 hours, 45/hour. (Although the work decreases by 470 hours, the engineer assigned to the track assembly line also spends time on other products, and there would be no reduction in his salary.) 75 fewer material moves at 30 per move. Required: 1. Ignore the special study, and determine whether the track assembly should be produced internally or purchased from the supplier. 2. Now, using the special study data, repeat the analysis. 3. Discuss the qualitative factors that would affect the decision, including strategic implications. 4. After reviewing the special study, the controller made the following remark: This study ignores the additional activity demands that purchasing would cause. For example, although the demand for inspecting the part on the production floor decreases, we may need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs? Is the controller right?
Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year: Silven produces two models of cell phones with the following expected activity demands: 1. Determine the total overhead assigned to each product using the four activity drivers. 2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs. 3. Using ABC as the benchmark, calculate the percentage error and comment on the accuracy of the reduced system. Explain why this approach may be desirable.
Cicleta Manufacturing has four activities: receiving materials, assembly, expediting products, and storing goods. Receiving and assembly are necessary activities; expediting and storing goods are unnecessary. The following data pertain to the four activities for the year ending 20x1 (actual price per unit of the activity driver is assumed to be equal to the standard price): Required: 1. Prepare a cost report for the year ending 20x1 that shows value-added costs, non-value-added costs, and total costs for each activity. 2. Explain why expediting products and storing goods are non-value-added activities. 3. What if receiving cost is a step-fixed cost with each step being 1,500 orders whereas assembly cost is a variable cost? What is the implication for reducing the cost of waste for each activity?
Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided: aCalculated using number of dies as the single unit-level driver. bCalculated by multiplying the consumption ratio of each product by the cost of each activity. Required: 1. Using the five most expensive activities, calculate the overhead cost assigned to each product. Assume that the costs of the other activities are assigned in proportion to the cost of the five activities. 2. Calculate the error relative to the fully specified ABC product cost and comment on the outcome. 3. What if activities 1, 2, 5, and 8 each had a cost of 650,000 and the remaining activities had a cost of 50,000? Calculate the cost assigned to Wafer A by a fully specified ABC system and then by an approximately relevant ABC approach. Comment on the implications for the approximately relevant approach.
Kenkel, Ltd. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 80,000. b. Requisitioned raw materials to production, 80,000. c. Distributed direct labor costs, 10,000. d. Factory overhead costs incurred, 60,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 225,000, on account.
For E2-17, prepare any journal entries that would have been different if the only trigger points had been the purchase of materials and the sale of finished goods. Davis Co. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 70,000. b. Requisitioned raw materials to production, 70,000. c. Distributed direct labor costs, 15,000. d. Factory overhead costs incurred, 45,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 195,000, on account. (Hint: Use a single account for raw materials and work in process.)
Pinter Company had the following environmental activities and product information: 1. Environmental activity costs 2. Driver data 3. Other production data Required: 1. Calculate the activity rates that will be used to assign environmental costs to products. 2. Determine the unit environmental and unit costs of each product using ABC. 3. What if the design costs increased to 360,000 and the cost of toxic waste decreased to 750,000? Assume that Solvent Y uses 6,000 out of 12,000 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 14,250 of 15,000 pounds of toxic waste. What is the new environmental cost for Solvent Y?
Davis Co. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 70,000. b. Requisitioned raw materials to production, 70,000. c. Distributed direct labor costs, 15,000. d. Factory overhead costs incurred, 45,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 195,000, on account. (Hint: Use a single account for raw materials and work in process.)
Medical Tape makes two products: Generic and Label. It estimates it will produce 423,694 units of Generic and 652,200 of Label, and the overhead for each of its cost pools is as follows: It has also estimated the activities for each cost driver as follows: How much is the overhead allocated to each unit of Generic and Label?
Ole Company manufactures two products, Product A and Product B. Currently, machine hours are used to allocate the overhead costs to the two products. Ole Company is considering adopting an activity-based costing system. If so, overhead costs will be traced to the following activities: Activities Machining Quality Control Material Moves Activity cost pools $300,000 $200,000 $400,000 Cost Drivers Machine Hours Number of inspections Number of moves Product A 30,000 400 2,000 Product B 20,000 600 6,000 (a) Calculate the total overhead cost assigned to Product A under the current system. (b) Calculate the total overhead cost for Product A if the company implements activity-based costing system. (c) Briefly explain which costing method gives a more accurate picture of the costs. (d) Suppose you are the management accountant in a university. List any three (3)activities commonly carried out in universities and identify an appropriate cost driver for each activity.
Akhbar LLC uses ABC costing for its products “Deluxe’ and ‘Premium”. The total estimated factory overhead is divided into two activities. i) Purchase related overhead cost RO 10,000ii) Quality inspection overhead cost RO 5000The expected activities are 100 for purchase and 500 for quality inspection. Deluxe requires 60 purchase orders and 300 quality checks and Premium requires 40 purchase orders and 200 quality checks. Based on the information given, answer the following question The amount of overheads allocated to the product Deluxe and Premium for purchase cost will be?
Moistner, Inc., manufactures and sells two products: Product E6 and Product W9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product E6 700 7.0 4,900 Product W9 100 5.0 500 Total direct labor-hours 5,400 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product E6 Product W9 Total Labor-related DLHs $ 233,604 4,900 500 5,400 Machine setups setups 30,942 500 400 900 Order size MHs 712,045 4,200 4,300 8,500 $ 976,591 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of…