After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility,Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups.He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability.He plans to produce 109,000 units of the Sport model and 44,500 units of the Pro model in the first quarter. He believes that with hismore efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 34 percent.Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing FacilityActivityAssembly buildingAssemblingSetting up machinesHandling materialPackaging buildingInspecting and packing:ShippingDirect materialDirect laborAssemblyPackaging.Total direct labor.Direct costsOverheadAssembly buildingCost DriverSAREEFFSENEGERMachine-hour'sSetup hoursProduction runs20Direct labor-hours.Number of shipmentsAssembling (@S30 per MH)Setting up machine ( $900 per setup hour)IGARAThird Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing FacilitySport$1,509,000giSWCost Driver VolumeProSport6,900491763,600189< Prev30, 9004904924,600218$ 759,000999,000$1,758,000$3, 267,000$ 207,00044,1803 of 18AnnTotal37,80053966www88, 200327Pro$2,418,000$ 618,000378,000$ 996,000$3,414, 000$ 927,000441,000L2AnnNext > Packaging buildingInspecting and packing Direct labor-hoursShippingNumber of shipmentsDirect materialDirect laborAssemblyPackagingThird Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing FacilitySport$1,509,000Total direct laborDirect costsOverheadAssembly buildingAssembling (@ $30 per MH)Setting up machine (@ $900 per setup hour)Handling material (@ $3,000 per run)63, 600109Packaging building.Inspecting and packing (@ $5 per direct labor-hour)Shipping (@$1,320 per shipment)Total ABC overhead.Total ABC costNumber of unitsUnit cost24, 600218759, 000999,000$1,758,000$3,267,000$207,00044, 10051,000$318,000.143, 880763,980$4,030, 980109,00036.98$88, 200327Pro$2,418,000$ 618,000378,000$ 996,000$3,414,000$927,000441, 000147,000123, 000287, 760$1,925, 760$5,339, 76044,500$ 119.99Required:a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costinAssume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assumea setup hour remains at $900.

Activity-Based CostingActivity-Based Costing (ABC) is a costing approach that is used to more…

After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 109,000 units of the Sport model and 44,500 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 34 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Activity Assembly building Assembling Setting up machines Handling material Packaging building Inspecting and packing Shipping Direct material Direct labor Assembly Packaging Cost Driver Machine-hours Setup hours Production runs Total direct labor Direct labor-hours Number of shipments Cost Driver Volume Pro Direct costs Overhead Assembly building Assembling (@ $30 per MH) Setting up machine (3 $900 per setup hour) wwwda 76 44 ARA Sport 6,900 49 17 63, 600 109 30, 900 490 49 Third Quarter Unit Cost Report. Activity-Based Costing-CenterPoint Manufacturing Facility Sport $1,509,000 24,600 218 $ 759,000 999,000 $1,758, 000 $3, 267,000 Total 37,800 539 66 $207,000 44,180 PA Ann 88, 200 327 Pro $2,418,000 $ 618,000 378,000 $ 996,000 $3,414, 000 $ 927,000 441,000 Ann

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q