Managerial Accounting
17th Edition
ISBN: 9781260247787
Author: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Publisher: RENT MCG
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Chapter 2.A, Problem 4P
PROBLEM 2A-4 Activity-Based Absorption Costing as an Alternative to Traditional Product Costing LO2-5
Ellix Company manufactures two models of ultra-high fidelity speakers-the X200 model and the X99 model. Data regarding the two products follow:
Additional information about the company follows:
- Model X200 requires $72 in direct materials per unit, and model X99 requires S50.
- The direct labor workers are paid S20 per hour.
- The company has always used direct labor-hours as the base for applying
manufacturing overhead cost to products. - Model X200 is more complex to manufacture than model X99 and requires the use of special equipment.
- Because of the special work required in (d) above, the company is considering the use of activity-based absorption costing to apply manufacturing overhead cost to products. Three activity cost pools have been identified as follows:
Estimated Total Activity
| Activity Cost Pool | Activity Measure | Estimate Total Cost | X200 | X99 | Total |
| Machine setups | Number of setups | $ 360,000 | 50 | 100 | 150 |
| Special processing…. | Machine-hours | 180,000 | 12,000 | 0 | 12,000 |
| General factory | Direct labor-hours | 1,260,000 | 9,000 | 27,000 | 36,000 |
$1,800,000
Required:
- Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products.
- Compute the plantwide predetermined overhead rate.
- Compute the unit product cost of each model.
- Assume that the company decides to use activity-based absorption costing to apply' overhead cost to products.
- Compute the activity rate for each activity cost pool and determine the amount of overhead cost that would be applied to each model using the activity- based approach.
- Compute the unit product cost of each model.
- Explain why overhead cost shifted from the high-volume model to the low-volume model under the activity-based approach.
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Chapter 2 Solutions
Managerial Accounting
Ch. 2.A - EXERCISE 2A-1 Activity-Based Absorption Costing...Ch. 2.A - EXERCISE 2A-2 Activity-Based Absorption Costing as...Ch. 2.A - EXERCISE 2A-3 Activity-Based Absorption Costing as...Ch. 2.A - PROBLEM 2A-4 Activity-Based Absorption Costing as...Ch. 2.A - Prob. 5PCh. 2.A -
CASE 2A-6 Activity-Based Absorption Costing and...Ch. 2.B - EXERCISE 2B-1 Overhead Rate Based on Capacity...Ch. 2.B - EXERCISE 2B-2 Overhead Rates and Capacity Issues...Ch. 2.B - Prob. 3PCh. 2.B - Prob. 4C
Ch. 2 - Prob. 1QCh. 2 - What is absorption costing?Ch. 2 - What is normal costing?Ch. 2 - How is the unit product cost of a job calculated?
Ch. 2 - Explain the four-step process used to compute a...Ch. 2 - What is the purpose of the job cost sheet in a...Ch. 2 - Explain why some production costs must be assigned...Ch. 2 - Why do companies use predetermined overhead rates...Ch. 2 - What factors should be considered in selecting an...Ch. 2 - If a company fully allocates all of its overhead...Ch. 2 - Would you expect the amount of applied overhead...Ch. 2 - Prob. 12QCh. 2 - What is a plantwide overhead rate? Whyare multiple...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 3AECh. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 1F15Ch. 2 - Prob. 2F15Ch. 2 - Prob. 3F15Ch. 2 - Prob. 4F15Ch. 2 - Prob. 5F15Ch. 2 - Prob. 6F15Ch. 2 - Prob. 7F15Ch. 2 - Prob. 8F15Ch. 2 - Prob. 9F15Ch. 2 - Prob. 10F15Ch. 2 - Prob. 11F15Ch. 2 - Sweeten Company had no jobs in progress at the...Ch. 2 - Prob. 13F15Ch. 2 - Prob. 14F15Ch. 2 - Prob. 15F15Ch. 2 - EXERCISE 2-1 Compute a Predetermined Overhead Rate...Ch. 2 - Prob. 2ECh. 2 - EXERCISE 2–3 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 24 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 2-5 Computing Total Job Costs and Unit...Ch. 2 - Prob. 6ECh. 2 - EXERCISE 2-7 Job-Order Costing; Working Backwards...Ch. 2 - EXERCISE 2-8 Applying Overhead Cost; Computing...Ch. 2 - EXERCISE 2–9 Job-Order Costing and Decision Making...Ch. 2 - Prob. 10ECh. 2 - Prob. 11ECh. 2 - Prob. 12ECh. 2 - EXERCISE 2—13 Departmental Predetermined Overhead...Ch. 2 - EXERCISE 214 Job-Orders Costing for a Service...Ch. 2 - Prob. 15ECh. 2 - PROBLEM 2—16 Plantwide Predetermined Overhead...Ch. 2 - PROBLEM 217 Plantwide and Departmental...Ch. 2 - Prob. 18PCh. 2 - Prob. 19PCh. 2 - Prob. 20PCh. 2 - PROBLEM 2-21 Plant wide Versus Multiple...Ch. 2 - CASE 2-22 Plantwide versus Departmental Overhead...
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