Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 4, Problem 13P
ABC Cost Hierarchy L04−1
Mitchell Corporation manufactures a variety of products in a single facility. Consultants hired by the company to do an activity-based costing analysis have identified the following activities carried out in the company on a routine basis:
a. Milling machines are used to make components for products.
b. A percentage of all completed goods are inspected on a random basis.
c. Production orders are issued for jobs.
d. The company’s grounds crew maintains planted areas surrounding the factory.
e. Employees are trained in general procedures.
f. The human resources department screens and hires new employees.
g. Purchase orders are issued for materials required in production.
h. Material is received on the receiving dock and moved to the production area.
i. The plant controller prepares periodic accounting reports.
j. The engineering department makes modifications in the designs of products.
k. Machines are set up between batches of different products.
L The maintenance crew does routine periodic maintenance on general-purpose equipment.
Required:
1. Classify each of the above activities as a unit-level, batch-level, product-level, or facility-level activity.
2. For each of the above activities, suggest an activity measure that could be used to allocate its costs to products.
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Students have asked these similar questions
TCM Company uses activity-based costing to determine products costs for external financial reports. The
company has provided the following data concerning its activity-based costing system:
Activity cost pools (and
activity measures)
Depreciation (allocated
based on machine-hours)
Batch setup (allocated based
on # of set ups)
General Factory (allocated
based on direct labor hours)
Estimated Overhead costs
$67,500
273,700
204,000
Expected Activity (Allocation base)
Product y
Product x
Activity Cost pool
Depreciation
Batch setup
General factory
The activity rate for the general factory activity cost pool is?
Total
5000 m hours
4000
1000
7000 set ups
3000
4000
8000 dl hours
1000
7000
ABC Cost Hierarchy
The following activities occur at Greenwich Corporation, a company that manufactures a variety of products.
a. Receive raw materials from suppliers.
b. Manage parts inventories.
c. Do rough milling work on products.
d. Interview and process new employees in the personnel department.
e. Design new products.
f. Perform periodic preventive maintenance on general-use equipment.
g. Use the general factory building.
h. Issue purchase orders for a job.
Required:
Classify each of the activities above as either a unit-level, batch-level, product-level, or organization-sustaining activity.
Angara Corporation uses activity - based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity - based costing system: Activity Cost Pool (and Activity Measure) Total Cost Machine related (machine - hours) $ 168, 300 Batch setup (setups) $ 721, 600 Order size (direct labor - hours) $ 138, 000 Activity Cost Pools Total Activity Product X Product Y Total Machine related 1,800 9,200 11,000 Batch setup 4,100 6, 900 11,000 Order size 7, 000 5,000 12,000 The total amount of overhead cost allocated to Product X would be closest to: Note: Do not round your intermediate calculations. Multiple Choice $ 377,000 $721,600 $349, 460 $650, 900
Chapter 4 Solutions
Introduction To Managerial Accounting
Ch. 4 - What are the three common approaches for assigning...Ch. 4 - Why does activity-based costing appeal to some...Ch. 4 - Why do departmental overheadrates something result...Ch. 4 - What are the four hierarchical levels of activity...Ch. 4 - Why activity-based costing is described as a...Ch. 4 - Why do overhead costs often shift from high-volume...Ch. 4 - What are the three major ways in which...Ch. 4 - What are the major limitations of activity-based...Ch. 4 - Prob. 1AECh. 4 - Prob. 2AE
Ch. 4 - Change the data in red so that the Data area looks...Ch. 4 - Prob. 1F15Ch. 4 - Prob. 2F15Ch. 4 - Prob. 3F15Ch. 4 - Greenvood Company manufactures two products14,000...Ch. 4 - Prob. 5F15Ch. 4 - Prob. 6F15Ch. 4 - Greenvood Company manufactures two products14,000...Ch. 4 - Prob. 8F15Ch. 4 - Greenwood Company manufactures two products14,000...Ch. 4 - Prob. 10F15Ch. 4 - Prob. 11F15Ch. 4 - Greenwood Company manufactures two products14,000...Ch. 4 - Prob. 13F15Ch. 4 - Prob. 14F15Ch. 4 - Greenwood Company manufactures two products14,000...Ch. 4 - ABC Cost Hierarchy L041 The following activities...Ch. 4 - Compute Activity Rates L042 Rustafson Corporation...Ch. 4 - Compute ABC Product Costs L043 Lamer Corporation...Ch. 4 - Contrast ABC and Conventional Product Costs L044...Ch. 4 - Assigning Overhead to Products in ABC L042, L043...Ch. 4 - Cost Hierarchy and Activity Measures L041 Various...Ch. 4 - Contrast ABC and Conventional Product Costs L042,...Ch. 4 - Prob. 8ECh. 4 - Prob. 9ECh. 4 - Rocky Mountain Corporation makes two types of...Ch. 4 - Contrasting Activity-Based Costing and...Ch. 4 - Contrasting ABC and Conventional Product cost...Ch. 4 - ABC Cost Hierarchy L041 Mitchell Corporation...Ch. 4 - Prob. 14PCh. 4 - Prob. 15PCh. 4 - Contrasting ABC and Conventional Product Costs...Ch. 4 - Contrast Activity-Based Costing and Conventional...Ch. 4 - Adria Company recently implemented an...
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