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Fisher Fixtures manufactures three types of lighting fixtures, with model names of Silver, Gold, and Platinum. It applies all indirect costs according to an annual predetermined rate based on direct labor-hours. The plant controller has recommended that the company switch to an activity-based costing system. The controller's staff prepared the following cost estimates for next year (year 2) for the recommended cost drivers.
| Activity | Recommended Cost Driver | Estimated Cost | Estimated Cost Driver Activity | |
|---|---|---|---|---|
| Purchasing material | Number of purchase orders | $ 130,800 | 240 | purchase orders |
| Receiving material | Direct materials cost | 238,400 | $ 2,980,000 | |
| Setting up equipment | Number of production runs | 231,840 | 120 | runs |
| Machine |
Machine-hours | 80,260 | 16,052 | hours |
| Ensuring regulatory compliance | Number of inspections | 459,000 | 54 | inspections |
| Shipping | Number of units shipped | 1,087,200 | 604,000 | units |
| Total estimated cost | $ 2,227,500 |
In addition, management estimated 45,000 direct labor-hours for year 2.
Assume that the following cost-driver volumes occurred in January, year 2:
| Silver | Gold | Platinum | |
|---|---|---|---|
| Number of units produced | 32,000 | 10,000 | 3,000 |
| Direct labor-hours | 2,000 | 1,200 | 400 |
| Number of purchase orders | 7 | 6 | 3 |
| Direct materials costs | $ 97,500 | $ 60,000 | $ 37,500 |
| Number of production runs | 2 | 3 | 5 |
| Machine-hours | 700 | 175 | 100 |
| Number of inspections | 0 | 2 | 3 |
| Units shipped | 32,000 | 10,000 | 3,000 |
Labor costs are based on the contractual rate of $25 per hour.
Required:
-
Compute the predetermined rate for year 2 for use in the current product-costing system using direct labor-hours as the allocation base.
-
Compute the per-unit production costs for each model for January using direct labor-hours as the allocation base and the predetermined rate computed in requirement (a).
-
Compute the predetermined
overhead rate for year 2 for each cost driver using the estimated costs and estimated cost driver units prepared by the controller's staff to be used in an ABC system. -
Compute the per unit production costs for each product for January using the cost drivers recommended by the consultant and the predetermined rates computed in requirement (c). (Note: Do not assume that total overhead applied to products in January will be the same for activity-based costing as it was for the labor-hour-based allocation.)
Compute the predetermined rate for year 2 for use in the current product-costing system using direct labor-hours as the allocation base.
|
Account
|
Silver
|
Gold
|
Platinum
|
Total
|
|
Direct materials
|
$
97,500 |
$
60,000 |
$
37,500 |
$
195,000 |
|
Direct labor
|
??? | ??? | ???? |
0
|
|
Indirect costs
|
??? | ??? | ??? |
0
|
|
Total cost
|
$
97,500 |
$
60,000 |
$
37,500 |
$
195,000 |
|
Units produced
|
??? | ??? | ??? | |
|
Unit cost (rounded)
|
??? | ??? | ??? |
REQUIRED C.
|
Activity
|
Rate
|
|
|
Purchasing material
|
?? |
per order
|
|
Receiving material
|
?? |
%
|
|
Setting up equipment
|
?? |
per run
|
|
Machine maintenance
|
?? |
per machine hour
|
|
Ensuring compliance
|
?? |
per inspection
|
|
Shipping
|
?? |
per unit
|
REQUIRED D
|
Account
|
Silver
|
Gold
|
Platinum
|
Total
|
|
Direct materials
|
$
97,500 |
$
60,000 |
$
37,500 |
$
195,000 |
|
Direct labor
|
0
|
|||
|
Indirect costs
|
||||
|
Purchasing material
|
0
|
|||
|
Receiving material
|
0
|
|||
|
Setting up equipment
|
0
|
|||
|
Machine maintenance
|
0
|
|||
|
Ensuring compliance
|
0
|
|||
|
Shipping
|
0
|
|||
|
Total indirect costs
|
$
76,579 |
$
49,741 |
$
45,695 |
$
172,015 |
|
Total cost
|
$
97,500 |
$
60,000 |
$
37,500 |
$
195,000 |
|
Units produced
|
||||
|
Unit cost (rounded)
|
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Excellent job! For PART B the unit cost row is wrong for some reason.
(8.00 , 15.00, & 22.00) for some reason they are not correct
and I don't know why.
Also for PART D
the last 2 on the unit cost is wrong.
(14.00 & 31.00) I wonder why that is . Can you still help?
Excellent job! For PART B the unit cost row is wrong for some reason.
(8.00 , 15.00, & 22.00) for some reason they are not correct
and I don't know why.
Also for PART D
the last 2 on the unit cost is wrong.
(14.00 & 31.00) I wonder why that is . Can you still help?
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- Collin Company manufactures small appliances and uses an activity-based costing system. Information from its system for the year for all products follows: Activity cost pool Total cost Total activity. Assembly Inspection Packaging $460,000 $298,500 $19,700 A. $139,977.76 B. $115,566.24 C. $23,187.50 D. $26.50 20,000 8,500 1,800 machine - hours inspection - hours order The company makes 875 of its stand mixers a year, which requires a total of 27 machine hours, 15 inspection hours, and 9 orders. The stand mixer requires $16.00 in direct materials per unit and $10.50 in direct labor per unit. The stand mixer sells for $160 per unit. What is the profit margin in total for the stand mixer? (Do not round intermediary calculations and round your final answer to the nearest cent.)arrow_forwardXie Company identified the following activities, costs, and activity drivers for this year. The company manufactures two types of go- karts: Deluxe and Basic. Activity Handling materials Inspecting product Processing purchase orders Paying suppliers Insuring the factory. Designing packaging Activity Required: Compute the activity rate for each activity, assuming the company uses activity-based costing. (Round activity rate answers to 2 decimal places.) Handling material Inspecting product Processing orders Paying suppliers Insuring factory Designing packaging Expected Costs $700,000 975,000 180,000 250,000 375,000 150,000 Expected Costs $ $ Expected Activity 100,000 parts 1,500 batches 700 orders 500 invoices 40,000 square feet 2 models. 700,000 975,000 180,000 250,000 375,000 150,000 2,630,000 Activity Driver 100,000 parts 1,500 batches 700 orders 500 invoices 40,000 square feet 2 models Activity Ratearrow_forwardDate + + + + + I + ī + ||| I General Journal Account/Explanation Page G2 PR Debit Creditarrow_forward
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