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 4E
Contrast ABC and Conventional Product Costs L04−4
Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H isexpected to sell 40.000 units next year and Product L is expected to sell 8,000 units. A unit of eitherproduct requires 0.4 direct labor-hours.
The company’s total manufacturing
Required:
1. The company currently applies manufacturing overhead to products using direct labor-hours as theallocation base. If this method is followed, how much overhead cost would be applied to each product? Compute both the overhead cost per unit and the total amount of overhead cost that would beapplied to each product. (In other words, how much overhead cost is applied to a unit of Product H?Product L? How much overhead cost is applied in total to all the units of Product H? Product L?)
2. Management is considering an activity-based costing system and would like to know what impact this change might have on product costs. For purposes of discussion. it has been suggested that all of the manufacturing overhead be treated as a product-level cost. The total manufacturing overhead would be divided in half between the two products, with $816.000 assigned to Product H and $816,000 assignedto Product L.If this suggestion is followed, how much overhead cost per unit would be assigned to each product
3. Explain the impact on unit product costs of the switch in costing systems.
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Students have asked these similar questions
Sheddon Industries produces two products. The products' identified costs are as follows:
Product A
Product B
Direct materials $
Direct labor
20,000
12,000
$ 15,000
24,000
The company's overhead costs of $108,000 are allocated based on direct labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What is the
cost per unit for product B? (Do not round intermediate calculations.)
Multiple Choice
$7.80
$22.20
$16.80
None of the answers are correct.
The Northern Company manufactures 2,800 units per year. The full manufacturing costs per unit are as follows:
Direct materials
Direct labor
Variable manufacturing overhead
Average
Total
$2.00
8.00
6.00
fixed manufacturing overhead
6.00
$22.00
The Southern Company has offered to sell Northern Company 2,800 units for $15 per unit. If Northern Ring Company accepts the offer, $14,000 of fixed overhead will be eliminated. Northern should:
Select one:
о
a. Buy the units: the savings is $16.800
о
b. Buy the units; the savings is $33,600
о
c. Make the units; the savings is $2.800
о
d. Make the units; the savings is $16.800
Lopez Corporation sells a product for $18 per unit, and the standard cost card for the product shows the following costs
Direct material
$1
Direct labor
2
Overhead (80% fixed)
7
Total
$10
Refer to Lopez Corporation. Assume that Lopez has sufficient idle capacity to produce the 1,000 units. If Lopez wants to increase its operating profit by $5,600, what would it charge as a per-unit selling price?
Select one:
a. $18.00
b. $16.60
c. $10.00
d. $11.00
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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