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Cost & Management Accounting AC336 Question 3 (13 Marks) Krypton Inc. manufactures two products, Vintex and Bromal. The company estimated it would incur $160,690 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labour hours. Data concerning the current period's operations appear below: Estimated Volume Direct labour hours per unit Direct labour cost per unit Direct material cost per unit Activity cost pool Material acquisition costs Machine costs General factory costs Vintex 4,700 units 2.1 hours $33.60 $4.80 Driver Purchase orders Machine setups Direct labour hours Estimated overhead costs The company is considering using an activity-based costing system to compute unit product costs instead of its traditional single plant-wide system based on direct labour hours. The activity- based costing system would use three activity cost pools and drivers: Final Exam $78,800 $12,490 $69,400 Bromal 3,300 units 1.6 hours Data relating to these activities for the current period are given below: $25.60 $12.70 Vintex 920 150 9,870 Expected driver activity levels Bromal Total 730 80 5,280 1650 Activity cost pool Material acquisition costs Machine costs General factory costs Required: a) Compute the predetermined overhead rate under the single plant-wide method, and determine the unit product cost of each product for the current year. 230 15,150 b) Determine the unit product cost of each product for the current period using the activity- based costing approach. c) Which method will probably provide a better representation of unit cost? Explain briefly.

Cost & Management Accounting AC336 Question 3 (13 Marks) Krypton Inc. manufactures two products, Vintex and Bromal. The company estimated it would incur $160,690 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labour hours. Data concerning the current period's operations appear below: Estimated Volume Direct labour hours per unit Direct labour cost per unit Direct material cost per unit Activity cost pool Material acquisition costs Machine costs General factory costs Vintex 4,700 units 2.1 hours $33.60 $4.80 Driver Purchase orders Machine setups Direct labour hours Estimated overhead costs The company is considering using an activity-based costing system to compute unit product costs instead of its traditional single plant-wide system based on direct labour hours. The activity- based costing system would use three activity cost pools and drivers: Final Exam $78,800 $12,490 $69,400 Bromal 3,300 units 1.6 hours Data relating to these activities for the current period are given below: $25.60 $12.70 Vintex 920 150 9,870 Expected driver activity levels Bromal Total 730 80 5,280 1650 Activity cost pool Material acquisition costs Machine costs General factory costs Required: a) Compute the predetermined overhead rate under the single plant-wide method, and determine the unit product cost of each product for the current year. 230 15,150 b) Determine the unit product cost of each product for the current period using the activity- based costing approach. c) Which method will probably provide a better representation of unit cost? Explain briefly.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter3: Cost Behavior
Section: Chapter Questions
Problem 10E: SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that...
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Cost & Management Accounting AC336 Question 3 (13 Marks) Krypton Inc. manufactures two products, Vintex and Bromal. The company estimated it would incur $160,690 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labour hours. Data concerning the current period's operations appear below: Estimated Volume Direct labour hours per unit Direct labour cost per unit Direct material cost per unit Activity cost pool Material acquisition costs Machine costs General factory costs Required: Activity cost pool Material acquisition costs Machine costs General factory costs Vintex 4,700 units 2.1 hours Estimated overhead costs $33.60 $4.80 The company is considering using an activity-based costing system to compute unit product costs instead of its traditional single plant-wide system based on direct labour hours. The activity- based costing system would use three activity cost pools and drivers: Driver Purchase orders Machine setups Direct labour hours $78,800 $12,490 $69,400 Final Exam Data relating to these activities for the current period are given below: Bromal 3,300 units 1.6 hours $25.60 $12.70 Vintex 920 150 9,870 Fall 2021 Expected driver activity levels Bromal Total 730 80 5,280 1650 230 15,150 a) Compute the predetermined overhead rate under the single plant-wide method, and determine the unit product cost of each product for the current year. b) Determine the unit product cost of each product for the current period using the activity- based costing approach. c) Which method will probably provide a better representation of unit cost? Explain briefly.
Transcribed Image Text:Cost & Management Accounting AC336 Question 3 (13 Marks) Krypton Inc. manufactures two products, Vintex and Bromal. The company estimated it would incur $160,690 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labour hours. Data concerning the current period's operations appear below: Estimated Volume Direct labour hours per unit Direct labour cost per unit Direct material cost per unit Activity cost pool Material acquisition costs Machine costs General factory costs Required: Activity cost pool Material acquisition costs Machine costs General factory costs Vintex 4,700 units 2.1 hours Estimated overhead costs $33.60 $4.80 The company is considering using an activity-based costing system to compute unit product costs instead of its traditional single plant-wide system based on direct labour hours. The activity- based costing system would use three activity cost pools and drivers: Driver Purchase orders Machine setups Direct labour hours $78,800 $12,490 $69,400 Final Exam Data relating to these activities for the current period are given below: Bromal 3,300 units 1.6 hours $25.60 $12.70 Vintex 920 150 9,870 Fall 2021 Expected driver activity levels Bromal Total 730 80 5,280 1650 230 15,150 a) Compute the predetermined overhead rate under the single plant-wide method, and determine the unit product cost of each product for the current year. b) Determine the unit product cost of each product for the current period using the activity- based costing approach. c) Which method will probably provide a better representation of unit cost? Explain briefly.
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