Atlanta Systems produces two different products, Product A, which sells for $450 per unit, and Product B, which sells for $800 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows: Usage by Product A Usage by Cost Product B Design (Engineering Hours) Machining (Machine Hours) Inspection (Batches) $ 190,000 $1,800,000 $ 160,000 108 142 2,160 2,840 42 38 Atlanta manufactures 12,500 units of Product A and 10,200 units of Product B per month. Each unit of Product A uses $100 of direct materials and $45 of direct labor, while each unit of ProductB uses $140 of direct materials and $75 of direct lahor

Atlanta Systems produces two different products, Product A, which sells for $450 per unit, and Product B, which sells for $800 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows: Usage by Product A Usage by Cost Product B Design (Engineering Hours) Machining (Machine Hours) Inspection (Batches) $ 190,000 $1,800,000 $ 160,000 108 142 2,160 2,840 42 38 Atlanta manufactures 12,500 units of Product A and 10,200 units of Product B per month. Each unit of Product A uses $100 of direct materials and $45 of direct labor, while each unit of ProductB uses $140 of direct materials and $75 of direct lahor

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 4CE: Larsen, Inc., produces two types of electronic parts and has provided the following data: There are...

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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?
Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
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.
Sanford, Inc., has developed value-added standards for four activities: purchasing parts, receiving parts, moving parts, and setting up equipment. The activities, the activity drivers, the standard and actual quantities, and the price standards for 20x1 are as follows: The actual prices paid per unit of each activity driver were equal to the standard prices. Required: 1. Prepare a cost report that lists the value-added, non-value-added, and actual costs for each activity. 2. Which activities are non-value-added? Explain why. Also, explain why value-added activities can have non-value-added costs.
Atlanta Systems produces two different products, Product A, which sells for $650 per unit, and Product B, which sells for $1,200 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows: Usage by Product A Usage by Cost Product B Design (Engineering Hours) Machining (Machine Hours) Inspection (Batches) $ 230,000 $2,600,000 $ 240,000 116 134 2,320 2,680 34 46 Atlanta manufactures 12,500 units of Product A and 10,172 units of Product B per month. Each unit of Product A uses $100 of direct materials and $45 of direct labor, while each unit of Product B uses $140 of direct materials and $75 of direct labor. Required: a. Calculate the activity rate for design. Rate for Design per hour b. Calculate the activity rate for machining. Rate for…
Atlanta Systems produces two different products, Product A, which sells for $650 per unit, and Product B, which sells for $1,200 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows: Usage by Product A Usage by Product B Design (Engineering Hours) Machining (Machine Hours) Inspection (Batches) Cost $ 230,000 $2,600,000 $ 240,000 116 134 2,320 2,680 34 46 Atlanta manufactures 12,500 units of Product A and 10,172 units of Product B per month. Each unit of Product A uses $100 of direct materials and $45 of direct labor, while each unit of Product B uses $140 of direct materials and $75 of direct labor. Required: a. Calculate the activity rate for design. Rate for Design per hour b. Calculate the activity rate for machining. Rate for…
Walnut Systems produces two different products, Product A, which sells for $127 per unit, and Product B, which sells for $209 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows: Cost Usage by Product A Usage by Product B Design (Engineering Hours) $ 158,080 216 304 Machining (Machine Hours) $ 542,720 1,150 3,090 Inspection (Batches) $ 25,480 36 16 Walnut manufactures 10,900 units of Product A and 6,600 units of Product B per month. Each unit of Product A uses $40 of direct materials and $18 of direct labor, while each unit of Product B uses $74 of direct materials and $26 of direct labor. Required: a. Calculate the activity rate for design.b. Calculate the activity rate for machining.c.…
Walnut Systems produces two different products, Product A, which sells for $127 per unit, and Product B, which sells for $209 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows: Cost Usage by Product A Usage by Product B Design (Engineering Hours) $ 158,080 216 304 Machining (Machine Hours) $ 542,720 1,150 3,090 Inspection (Batches) $ 25,480 36 16 Walnut manufactures 10,900 units of Product A and 6,600 units of Product B per month. Each unit of Product A uses $40 of direct materials and $18 of direct labor, while each unit of Product B uses $74 of direct materials and $26 of direct labor. Required: a. Calculate the activity rate for design. (304)b. Calculate the activity rate for machining.…
Vattes, Incorporated, manufactures and sells two products: Product 15 and Product U1. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Product 15 Product U1 Direct Labor- Expected Hours Per Production Unit 700 7.0 200 4.0 Activity Cost Pools Labor-related Machine setups Order size Product 15 Product U1 Total direct labor-hours The direct labor rate is $22.00 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit $ 261.60 $ 121.60 Activity Measures DLHS setups MHS The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity, Expected Activity Total Direct Labor- Estimated Overhead Cost $ 268,698 Hours 4,900 800 5,700 37,324 633,895 $939,917 Product 15 Product U1 4,900 300 4,900 800 400 4,800 Total 5,700 700 9,700
Howden, Incorporated, manufactures and sells two products: Product P5 and Product S9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHS) required to produce that output appear below: Product P5 Product S9 Activity Cost Pools Labor-related Saved Machine setups Order size Direct Labor- Expected Hours Per Production Unit 300 7.0 900 4.0 Product P5 Product S9 Total direct labor-hours The direct labor rate is $25.70 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit $ 248.50 $ 294.80 Activity Measures DLHS setups MHS Total Direct Labor- The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Expected Activity Estimated Overhead Cost $ 247,152 28,990 519,241 $ 795,383 Which of the following statements concerning the unit product cost of Product S9 is true? (Round your intermediate…
Rondeau, Incorporated, manufactures and sells two products: Product V9 and Product M6. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Product V9 Product M6 Total direct labor-hours Product V9 Product M6 The direct labor rate is $24.20 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit $275.60 $ 168.80 Activity Cost Pools Labor-related Product testing Order size The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Required: Calculate the difference betwee the unit Expected Production 340 440 Traditional unit product cost ABC unit product cost Difference $ DLHs Tests MHS Product V9 Activity Measures Estimated Overhead Cost Direct Labor-Hours Per Unit 9.4 6.4 Product M6 0.00 $ Total Direct Labor-Hours 3,196 2,816 6,012 0.00 $ 95,656…
Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows: Activity Cost Pools Total Cost of Pool Cost Driver Estimated Cost Driver Machining $ 183,300 Number of machine hours 61,100 Designing costs 47,725 Number of design hours 5,750 Setup costs 71,150 Number of batches 500 Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows: Product A Product B Product C Number of machine hours 21,000 31,000 9,100 Number of design hours 2,300 1,350 2,100 Number of batches 60 180 260 How would you find the total overhead?

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(per unit)	Product A	Product B
Direct Materials	100.00	140.00
Direct Labor	45.00	75.00
Overhead Cost	75.49	118.27
Total Manufacturing cost per unit	220.49	333.27