Lens Care Incorporated (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras imilar equipment (B-13). The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost Pools Materials handling Manufacturing supervision Assembly Machine setup Inspection and testing Packaging Allocation Base Number of parts Hours of machine time Number of parts Each setup Logged hours Logged hours Costing Rate $ 3.70 per part $ 14.93 per hour $3.95 per part $ 57.15 per setup $ 46.15 per hour $ 20.15 per hour Cl currently sells the B-13 model for $4,700 and the F-32 model for $4,860. Manufacturing costs and activity usage for the two products are as follows: Direct materials B-13 $165.15 $76.12 F-32 Number of parts 173 133 Machine hours 8.55 4.33 Inspection time 3.00 2.10 Packaging time 1.55 1.15 Setups 7 6 The product cost for model B-13 is: Multiple Choice $2185 98

Lens Care Incorporated (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras imilar equipment (B-13). The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost Pools Materials handling Manufacturing supervision Assembly Machine setup Inspection and testing Packaging Allocation Base Number of parts Hours of machine time Number of parts Each setup Logged hours Logged hours Costing Rate $ 3.70 per part $ 14.93 per hour $3.95 per part $ 57.15 per setup $ 46.15 per hour $ 20.15 per hour Cl currently sells the B-13 model for $4,700 and the F-32 model for $4,860. Manufacturing costs and activity usage for the two products are as follows: Direct materials B-13 $165.15 $76.12 F-32 Number of parts 173 133 Machine hours 8.55 4.33 Inspection time 3.00 2.10 Packaging time 1.55 1.15 Setups 7 6 The product cost for model B-13 is: Multiple Choice $2185 98

Name: Vishnu Lens Care Incorporated (LCI) manufactures specialized equipment
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Description: Vishnu Lens Care Incorporated (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, andsimilar equipment (B-13).The ma

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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Reducir, Inc., produces two different types of hydraulic cylinders. Reducir produces a major subassembly for the cylinders in the Cutting and Welding Department. Other parts and the subassembly are then assembled in the Assembly Department. The activities, expected costs, and drivers associated with these two manufacturing processes are given below. Note: In the assembly process, the materials-handling activity is a function of product characteristics rather than batch activity. Other overhead activities, their costs, and drivers are listed below. Other production information concerning the two hydraulic cylinders is also provided: Required: 1. Using a plantwide rate based on machine hours, calculate the total overhead cost assigned to each product and the unit overhead cost. 2. Using activity rates, calculate the total overhead cost assigned to each product and the unit overhead cost. Comment on the accuracy of the plantwide rate. 3. Calculate the global consumption ratios. 4. Calculate the consumption ratios for welding and materials handling (Assembly) and show that two drivers, welding hours and number of parts, can be used to achieve the same ABC product costs calculated in Requirement 2. Explain the value of this simplification. 5. Calculate the consumption ratios for inspection and engineering, and show that the drivers for these two activities also duplicate the ABC product costs calculated in Requirement 2.
Benson Pharmaceuticals uses a process-costing system to compute the unit costs of the over-the-counter cold remedies that it produces. It has three departments: mixing, encapsulating, and bottling. In mixing, the ingredients for the cold capsules are measured, sifted, and blended (with materials assumed to be uniformly added throughout the process). The mix is transferred out in gallon containers. The encapsulating department takes the powdered mix and places it in capsules (which are necessarily added at the beginning of the process). One gallon of powdered mix converts into 1,500 capsules. After the capsules are filled and polished, they are transferred to bottling, where they are placed in bottles that are then affixed with a safety seal, lid, and label. Each bottle receives 50 capsules. During March, the following results are available for the first two departments: Overhead in both departments is applied as a percentage of direct labor costs. In the mixing department, overhead is 200% of direct labor. In the encapsulating department, the overhead rate is 150% of direct labor. Required: 1. Prepare a production report for the mixing department using the weighted average method. Follow the five steps outlined in the chapter. (Note: Round to two decimal places for the unit cost.) 2. Prepare a production report for the encapsulating department using the weighted average method. Follow the five steps outlined in the chapter. (Note: Round to four decimal places for the unit cost.) 3. CONCEPTUAL CONNECTION Explain why the weighted average method is easier to use than FIFO. Explain when weighted average will give about the same results as FIFO.
Electan Company produces two types of printers. The company uses ABC, and all activity drivers are duration drivers. Electan Company is considering using DBC and has gathered the following data to help with its decision. A. Activities with duration drivers: B. Activities with consumption ratios and costs: C. Products with cycle time and practical capacity: Required: 1. Using cycle time and practical capacity for each product, calculate the total time for all primary activities. Comment on the relationship to ABC. 2. Calculate the overhead rate that DBC uses to assign costs. Comment on the relationship to a unit-based plantwide overhead rate. 3. Use the overhead rate calculated in Requirement 2 to calculate (a) the overhead cost per unit for each product, and (b) the total overhead assigned to each product. How does this compare to the ABC assignments shown in Part B of the Information set? 4. What if the units actually produced were 10,000 for Printer A and 18,000 for Printer B. Using DBC, calculate the cost of unused capacity.
Larsen, Inc., produces two types of electronic parts and has provided the following data: There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plantwide rate? Which product is undercosted? 3. What if the machine hours were used for the plantwide rate? Would this remove the cost distortion of a plantwide rate?
Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost Pools Allocation Base Costing Rate Materials handling Number of parts $ 3.20 per part Manufacturing supervision Hours of machine time $ 14.88 per hour Assembly Number of parts $ 3.70 per part Machine setup Each setup $ 56.90 per setup Inspection and testing Logged hours $ 45.90 per hour Packaging Logged hours $ 19.90 per hour LCI currently sells the B-13 model for $3,575 and the F-32 model for $3,460. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $ 164.90 $ 75.92 Number of parts 168 128 Machine hours 8.30 4.28…
Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost Pools Allocation Base Costing Rate Materials handling Number of parts $ 3.90 per part Manufacturing supervision Hours of machine time $ 14.95 per hour Assembly Number of parts $ 4.05 per part Machine setup Each setup $ 57.25 per setup Inspection and testing Logged hours $ 46.25 per hour Packaging Logged hours $ 20.25 per hour LCI currently sells the B-13 model for $5,150 and the F-32 model for $5,420. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $ 165.25 $ 76.20 Number of parts 175 135 Machine hours 8.65 4.35…
Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost Pools Allocation Base Costing Rate Materials handling Number of parts $ 3.80 per part Manufacturing supervision Hours of machine time $ 14.94 per hour Assembly Number of parts $ 4.00 per part Machine setup Each setup $ 57.20 per setup Inspection and testing Logged hours $ 46.20 per hour Packaging Logged hours $ 20.20 per hour LCI currently sells the B-13 model for $4,925 and the F-32 model for $5,140. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $ 165.20 $ 76.16 Number of parts 174.00 134 Machine hours 8.60…
Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost Pools Allocation Base Costing Rate Materials handling Number of parts $ 2.40 per part Manufacturing supervision Hours of machine time $ 14.80 per hour Assembly Number of parts $ 3.30 per part Machine setup Each setup $ 56.50 per setup Inspection and testing Logged hours $ 45.50 per hour Packaging Logged hours $ 19.50 per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $ 164.50 $ 75.60 Number of parts 160 120 Machine hours 7.90 4.20…
Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost Pools Allocation Base Costing Rate Materials handling Number of parts $ 2.40 per part Manufacturing supervision Hours of machine time $ 14.80 per hour Assembly Number of parts $ 3.30 per part Machine setup Each setup $ 56.50 per setup Inspection and testing Logged hours $ 45.50 per hour Packaging Logged hours $ 19.50 per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $ 164.50 $ 75.60 Number of parts 160 120 Machine hours 7.90 4.20…
Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost Pools Allocation Base Costing Rate Materials handling Number of parts $ 2.40 per part Manufacturing supervision Hours of machine time $ 14.80 per hour Assembly Number of parts $ 3.30 per part Machine setup Each setup $ 56.50 per setup Inspection and testing Logged hours $ 45.50 per hour Packaging Logged hours $ 19.50 per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $ 164.50 $ 75.60 Number of parts 160 120 Machine hours 7.90 4.20…
Product-Costing Accuracy, Consumption Ratios, Activity Rates, ActivityCostingTristar Manufacturing produces two types of battery-operated toysoldiers: infantry and special forces. The soldiers are produced by usingone continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used toassign costs to each activity. The overhead activities, their costs, and theother related data are as follows: Required: 1. Calculate the total overhead assigned to each product by usingonly machine hours to calculate a plantwide rate.2. Calculate consumption ratios for each activity. (Round to twodecimal places.3. Calculate a rate for each activity by using the associated driver.(Round to two decimal places. 4. Assign the overhead costs to each product by using the activityrates computed in Requirement 3.5. CONCEPTUAL CONNECTION Comment on the differencebetween the assignment in Requirement 1 and the activity-basedassignment.
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