duction process for desks and cabinets is similar, although machines must be retooled for each product. Both materials and labour sts are directly traceable to individual products; however, overhead is a common cost and allocated using direct labour-hours as the ocation base. GF's accountant is considering the use of activity-based costing (ABC) and has suggested evaluating the system by plying it to the two office use products (desks and cabinets). The following data are available for a typical quarter. activity Cost Pool "arts receipts Machining assembly Quality control irect materials irect labour tal manufacturing cost ost per unit Activity Base Number of parts Machine-hours Units produced Units tested tal manufacturing cost ost per unit Desks $ 26,735 $ 23.25 $ $ Cabinets 28,275 17.67 Desks Activity Rate $ 1.00 per part. $11.00 per machine-hour $ 1.80 per unit $ 2.00 per unit Cabinets Desks 2,300 parts ch product consumed 690 direct labour-hours. quired: Determine the total manufacturing cost and cost per unit for each of the two product lines for the quarter, using activity-based sting to allocate overhead costs. (Round "Cost per unit" answers to 2 decimal places.) 235 machine-hours 1,150 units 115 units Activity Usage $ 5,750 $13,800 Redo the above using direct labour-hours as the allocation base. (Round "Cost per unit" answers to 2 decimal places.) Cabinets 1,600 parts 345 machine-hours 1,600 units 1,500 units $ 3,200 $13,800
duction process for desks and cabinets is similar, although machines must be retooled for each product. Both materials and labour sts are directly traceable to individual products; however, overhead is a common cost and allocated using direct labour-hours as the ocation base. GF's accountant is considering the use of activity-based costing (ABC) and has suggested evaluating the system by plying it to the two office use products (desks and cabinets). The following data are available for a typical quarter. activity Cost Pool "arts receipts Machining assembly Quality control irect materials irect labour tal manufacturing cost ost per unit Activity Base Number of parts Machine-hours Units produced Units tested tal manufacturing cost ost per unit Desks $ 26,735 $ 23.25 $ $ Cabinets 28,275 17.67 Desks Activity Rate $ 1.00 per part. $11.00 per machine-hour $ 1.80 per unit $ 2.00 per unit Cabinets Desks 2,300 parts ch product consumed 690 direct labour-hours. quired: Determine the total manufacturing cost and cost per unit for each of the two product lines for the quarter, using activity-based sting to allocate overhead costs. (Round "Cost per unit" answers to 2 decimal places.) 235 machine-hours 1,150 units 115 units Activity Usage $ 5,750 $13,800 Redo the above using direct labour-hours as the allocation base. (Round "Cost per unit" answers to 2 decimal places.) Cabinets 1,600 parts 345 machine-hours 1,600 units 1,500 units $ 3,200 $13,800
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
Transcribed Image Text:Green Furniture (GF) manufactures a variety of furniture for household use and just two items for office use: desks and cabinets. The
production process for desks and cabinets is similar, although machines must be retooled for each product. Both materials and labour
costs are directly traceable to individual products; however, overhead is a common cost and allocated using direct labour-hours as the
allocation base. GF's accountant is considering the use of activity-based costing (ABC) and has suggested evaluating the system by
applying it to the two office use products (desks and cabinets). The following data are available for a typical quarter.
Activity Cost Pool
Parts receipts
Machining
Assembly
Quality control
Direct materials
Direct labour
Total manufacturing cost
Cost per unit
Activity Base
Number of parts
Machine-hours
Units produced
Units tested
Total manufacturing cost
Cost per unit
$
$
Desks
26,735 $
23.25 $
Cabinets
Desks
28,275
17.67
Activity Rate
$1.00 per part
$11.00 per machine-hour
Each product consumed 690 direct labour-hours.
Required:
1. Determine the total manufacturing cost and cost per unit for each of the two product lines for the quarter, using activity-based
costing to allocate overhead costs. (Round "Cost per unit" answers to 2 decimal places.)
$ 1.80 per unit
$ 2.00 per unit
Cabinets
Desks
2,300 parts
235 machine-hours.
1,150 units
115 units
Activity Usage
$ 5,750
$13,800
2. Redo the above using direct labour-hours as the allocation base. (Round "Cost per unit" answers to 2 decimal places.)
Cabinets
1,600 parts
345 machine-hours
1,600 units
1,500 units
$3,200
$13,800
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