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 4.2DI
Compute activity-based
(LO 2),AP
Flynn Industries has three activity cost pools and two products. It expects to produce 3,000 units of Product BC113 and 1,500 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Flynn accumulated the following data relative to those activity cost pools and cost drivers.
| Annual Overhead Data | |||||
| Activity Cost Pools | Cost Drivers | Estimated Overhead |
|||
| Machine setup | Setups | $ 16,000 | |||
| Machining | Machine hours | 110,000 | |||
| Packing | Orders | 30,000 | |||
| Expected Use of Cost Drivers per Product | |||||
| Expected Use of Cost Drivers per Activity | Product BC113 | Product AD908 |
|||
| 40 | 25 | 15 | |||
| 5,000 | 1,000 | 4,000 | |||
| 500 | 150 | 350 | |||
Using the above data, do the following:
(a) Prepare a schedule showing the computations of the activity-based overhead rates per cost driver.
(b) Prepare a schedule assigning each activity's overhead cost to the two products.
(c) Compute the overhead cost per unit for each product. (Round to nearest cent.)
(d) Comment on the comparative overhead cost per product.
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Pharoah Industries has three activity cost pools and two products. It expects to produce 2,800 units of Product SZ09 and 1,300 of
Product NZ16. Having identified its activity cost pools and the cost drivers for each pool, Pharoah accumulated the following data
relative to those activity cost pools and cost drivers.
Activity Cost Pool
Machine set-ups
Assembling
Inspection
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Calculate the overhead rates.
Assembling
Inspection
SZ09 $
Cost Driver
Set-ups
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NZ16 $
Inspections
GA
LA
$
LA
Assign the overhead cost to the two products.
ta
Estimated
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$63,600
354,000
6,160
Estimated Use
of Cost Drivers
per set-up
200
17,700
per inspection
110
per machine hour
SZ09
130
NZ16
60
70
10,300 7,400
50
Sabby Industries has three activity cost pools and two products. It expects to produce 2,900 units of Product S209 and 1.200 of
Product NZ16. Having identified its activity cost pools and the cost drivers for each pool, Sabby accumulated the following data
relative to those activity cost pools and cost drivers.
Activity Cost Pool
Machine set-ups
Assembling
Inspection
(a)
Cost Driver
Assembling
Set-ups
Machine hours
Calculate the overhead rates.
Inspection
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Machine set-ups $
$
Estimated
Overhead
$78,660
323,000
6,400
Estimated Use
of Cost Drivers
per set-up
190
per inspection
17,000
100
per machine hour
5709 NZ16
130
10,100
60
60
6,900
40
Pronghorn Industries has three activity cost pools and two products. It estimates production 2,000 units of Product BC113
and 1,000 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Pronghorn accumulated the
following data relative to those activity cost pools and cost drivers.
Activity Cost Pools
Machine setup
Machining
Packing
(a)
Annual Overhead Data
Activity
Cost
Pools
Machine
setup
Using the above data, do the following:
Machining
Packing
Cost Drivers
$
Setups
$
Machine hours
Orders
Estimated
Overhead
Estimated
Overhead
$17,500
120,750
28,670
Use of
Cost Drivers per Product
Estimated Use
of Cost
Drivers per Activity
35
Prepare a schedule showing the computations of the activity-based overhead rates per cost driver.
4,830
470
Estimated Use of Cost
Drivers per Activity
setups
machine
hours
Product
BC113
orders
20
1,140
120
$
$
$
Product
AD908
15
3,690
350
Activity-Based
Overhead Rates
per
setup
per
machine
hr.
per
order
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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