Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 4, Problem 4.10E
Kragan Clothing Company manufactures its own designed and labeled athletic wear and sells its products through catalog sales and retail outlets. While Kragan has for years used activity-based costing in its manufacturing activities, it has always used traditional costing in assigning its selling costs to its product lines. Selling costs have traditionally been assigned to Kragan's product lines at a rate of 70% of direct materials costs. Its direct materials costs for the month of March for Kragan's “high-intensity” line of athletic wear are $400,000. The company has decided to extend activity-based costing to its selling costs. Data relating to the “high-intensity” line of products for the month of March are as follows.
Instructions
(a) Compute the selling costs to be assigned to the “high-intensity” line of athletic wear for the month of March (1) using the traditional product costing system (direct materials cost is the cost driver), and (2) using activity-based costing.
(b) By what amount does the traditional product costing system undercost or overcost the “high-intensity” product line?
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Keyboard uses activity-based costing. Two of Keyboard's
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Thornton Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to
make both products even though the processes are quite different. The company has recently converted its cost accounting system to
activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared for the third quarter of the year
(during which Thornton made 70,500 tennis racquets and 30,200 badminton racquets).
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Direct materials
Direct labor
Category
Unit level
Batch level
Product level
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$ 630,000
322,400
147,500
594,000
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Tennis racquet
Badminton racquet
Tennis Racquet (TR)
$ 16.60 per unit
33.50 per unit
Required A Required B
Badminton Racquet (BR)
$ 13.70 per unit.
24.50 per unit.
Cost Driver
Number of inspection hours.
Number of setups
Number of TV commercials
Number of machine hours
Inspectors are paid according to the number of actual hours worked, which is…
Munoz Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility
to make both products even though the processes are quite different. The company has recently converted its cost
accounting system to activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared
for the third quarter of the year (during which Munoz made 68,500 tennis racquets and 29,200 badminton racquets).
Direct Cost
Direct materials
Direct labor
Category
Unit level
Batch level
Product level
Facility level
Total
Estimated
Cost
$ 754,000
320,000
155,000
660,000
$
1,889,000
Required A
Tennis Racquet (TR)
$16.60 per unit
33.50 per unit
Badminton Racquet (BR)
$ 13.20 per unit
23.70 per unit
Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets
inspected. Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the…
Chapter 4 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 4 - Under what conditions is direct labor a valid...Ch. 4 - What has happened in recent industrial history to...Ch. 4 - In an automated manufacturing environment, what...Ch. 4 - What is generally true about overhead allocation...Ch. 4 - What are the principal differences between...Ch. 4 - What is the formula for computing activity-based...Ch. 4 - What steps are involved in developing an activity-...Ch. 4 - Prob. 8QCh. 4 - What is an activity cost pool?Ch. 4 - Prob. 10Q
Ch. 4 - Prob. 11QCh. 4 - What is the formula for assigning activity cost...Ch. 4 - What are the benefits of activity-based costing?Ch. 4 - What are the limitations of activity-based...Ch. 4 - Under what conditions is ABC generally the...Ch. 4 - Prob. 16QCh. 4 - Prob. 17QCh. 4 - Prob. 18QCh. 4 - Prob. 19QCh. 4 - Prob. 20QCh. 4 - Prob. 4.1BECh. 4 - Finney Inc. has conducted an analysis of overhead...Ch. 4 - Splash Co. identifies the following activities...Ch. 4 - Mason Company manufactures four products in a...Ch. 4 - Morgana Company identifies three activities in its...Ch. 4 - Weisman, Inc. uses activity-based costing as the...Ch. 4 - Spud, Inc. a manufacturer of gourmet potato chips,...Ch. 4 - Prob. 4.8BECh. 4 - Pine and Danner is an architectural firm that is...Ch. 4 - Prob. 4.10BECh. 4 - Fixlt, Inc. operates 20 injection molding machines...Ch. 4 - Prob. 4.12BECh. 4 - Indicate whether the following statements are true...Ch. 4 - Compute activity-based overhead rates and assign...Ch. 4 - Adamson Company manufactures four lines of garden...Ch. 4 - Ready Ride is a trucking company. It provides...Ch. 4 - Saddle Inc. has two types of handbags: standard...Ch. 4 - Ayala Inc. has conducted the following analysis...Ch. 4 - EcoFabrics has budgeted overhead costs of 945,000....Ch. 4 - Altex Inc. manufactures two products: car wheels...Ch. 4 - Perdon Corporation manufactures safeslarge mobile...Ch. 4 - Santana Corporation manufactures snowmobiles in...Ch. 4 - Rojas Vineyards in Oakville, California, produces...Ch. 4 - Wilmington, Inc. manufactures five models of...Ch. 4 - Air United, Inc. manufactures two products:...Ch. 4 - Kragan Clothing Company manufactures its own...Ch. 4 - Health 'R Us, Inc., uses a traditional product...Ch. 4 - Santana Corporation manufactures snowmobiles in...Ch. 4 - William Mendel Sons, Inc. is a small...Ch. 4 - Venus Creations sells window treatments (shades,...Ch. 4 - Snap Prints Company is a small printing and...Ch. 4 - Lasso and Markowitz is a law firm that is...Ch. 4 - Manzeck Company operates a snow-removal service....Ch. 4 - Combat Fire, Inc. manufactures steel cylinders and...Ch. 4 - Prob. 4.2APCh. 4 - Shaker Stairs Co. designs and builds factory-made...Ch. 4 - Prob. 4.4APCh. 4 - Lewis and Stark is a public accounting firm that...Ch. 4 - CURRENT DESIGNS As you teamed in the previous...Ch. 4 - Prob. 4.1BYPCh. 4 - Prob. 4.2BYPCh. 4 - Curtis Rich, the cost accountant for Hi-Power...Ch. 4 - As discussed in the chapter, the principles...
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