Activity based costing: ABC is a method used in cost accounting that first identifies certain activities,then assigns cost to identified overhead activities and then allocate costs to products. Costs are assigned to products by building a relationship among costs, various activities and products. Activity cost pool: Activity cost pool includes all the costs that are incurred while performing one manufacturing process or task. It helps in getting an estimate of the accurate cost of a process. An activity rate for all the activity cost pools.

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Answer 1

Question

Chapter 4, Problem 8E

1

To determine

Activity based costing:

ABC is a method used in cost accounting that first identifies certain activities,then assigns cost to identified overhead activities and then allocate costs to products. Costs are assigned to products by building a relationship among costs, various activities and products.

Activity cost pool:

Activity cost pool includes all the costs that are incurred while performing one manufacturing process or task. It helps in getting an estimate of the accurate cost of a process.

An activity rate for all the activity cost pools.

2

To determine

Unit product cost

Calculation of unit product cost is done by dividing total cost with the number of units produced. Total cost incurred in the production process is considered.

To calculate: Unit product cost of two given products.

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! Required information [The following information applies to the questions displayed below.] Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow. Direct Labor- Hours per unit 0.60 0.60 Rims Posts Additional information about the company follows: a. Rims require $17 in direct materials per unit, and Posts require $14. b. The direct labor wage rate is $20 per hour. c. Rims are more complex to manufacture than Posts and they require special equipment. d. The ABC system has the following activity cost pools: Activity Cost Pool Machine setups Special processing General factory Annual Production 26,000 units 84,000 units Unit product cost of Rims Unit product cost of Posts Activity Measure Number of setups Machine-hours Direct labor-hours $ Estimated Overhead Cost $39,480 $ 146,160 $ 1,092,000 36.31 Estimated Activity Rims 80 3,000 15,600 Posts 320 0 50,400 2. Determine the unit product cost of each product according to the ABC…

Fogerty Company makes two products—titanium Hubs and Sprockets. Data regarding the two products follow: DirectLabor-Hours per Unit AnnualProduction Hubs 0.70 11,000 units Sprockets 0.30 45,000 units Additional information about the company follows: Hubs require $25 in direct materials per unit, and Sprockets require $19. The direct labor wage rate is $15 per hour. Hubs require special equipment and are more complex to manufacture than Sprockets. The ABC system has the following activity cost pools: Estimated Activity Activity Cost Pool (Activity Measure) Overhead Cost Hubs Sprockets Total Machine setups (number of setups) $ 16,200 100 80 180 Special processing (machine-hours) $ 188,000 4,700 0 4,700 General factory (organization-sustaining) $ 196,700 NA NA NA Determine the unit product cost of each product according to the ABC system. HUBS SPROCKETS Direct Materials…

Standard absorption cost per unit A cost analyst for Stamper Manufacturing Co. has assembled the following data about the Model 24 stamp pad: The piece of sheet metal from which eight pad cases can be made costs $0.14. This amount is based on the number of sheets in a 3,000-pound bundle of sheet metal, which is the usual purchase quantity. The foam pad that is put in the case costs $0.02, based on the number of pads that can be cut from a large roll of foam. Production standards, based on engineering analysis recognizing attainable performance, provide for the manufacture of 1,800 pads by two workers in an eight-hour shift. The standard direct labor pay rate is $11 per hour. Manufacturing overhead is applied to units produced using a predetermined overhead application rate of $16 per direct labor hour, of which $7 per hour is fixed manufacturing overhead.Required:a. Calculate the standard absorption cost of a package of 12 stamp pads.b. Stamper Manufacturing Co.’s management is…

Answer 2

Question

Chapter 4, Problem 8E

1

To determine

Activity based costing:

ABC is a method used in cost accounting that first identifies certain activities,then assigns cost to identified overhead activities and then allocate costs to products. Costs are assigned to products by building a relationship among costs, various activities and products.

Activity cost pool:

Activity cost pool includes all the costs that are incurred while performing one manufacturing process or task. It helps in getting an estimate of the accurate cost of a process.

An activity rate for all the activity cost pools.

2

To determine

Unit product cost

Calculation of unit product cost is done by dividing total cost with the number of units produced. Total cost incurred in the production process is considered.

To calculate: Unit product cost of two given products.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

Question

Chapter 4, Problem 8E

1

To determine

Activity based costing:

ABC is a method used in cost accounting that first identifies certain activities,then assigns cost to identified overhead activities and then allocate costs to products. Costs are assigned to products by building a relationship among costs, various activities and products.

Activity cost pool:

Activity cost pool includes all the costs that are incurred while performing one manufacturing process or task. It helps in getting an estimate of the accurate cost of a process.

An activity rate for all the activity cost pools.

2

To determine

Unit product cost

Calculation of unit product cost is done by dividing total cost with the number of units produced. Total cost incurred in the production process is considered.

To calculate: Unit product cost of two given products.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 4, Problem 8E

1

To determine

Activity based costing:

ABC is a method used in cost accounting that first identifies certain activities,then assigns cost to identified overhead activities and then allocate costs to products. Costs are assigned to products by building a relationship among costs, various activities and products.

Activity cost pool:

Activity cost pool includes all the costs that are incurred while performing one manufacturing process or task. It helps in getting an estimate of the accurate cost of a process.

An activity rate for all the activity cost pools.

2

To determine

Unit product cost

Calculation of unit product cost is done by dividing total cost with the number of units produced. Total cost incurred in the production process is considered.

To calculate: Unit product cost of two given products.

Expert Solution & Answer

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Answer 5

Chapter 4, Problem 8E

1

To determine

Activity based costing:

ABC is a method used in cost accounting that first identifies certain activities,then assigns cost to identified overhead activities and then allocate costs to products. Costs are assigned to products by building a relationship among costs, various activities and products.

Activity cost pool:

Activity cost pool includes all the costs that are incurred while performing one manufacturing process or task. It helps in getting an estimate of the accurate cost of a process.

An activity rate for all the activity cost pools.

2

To determine

Unit product cost

Calculation of unit product cost is done by dividing total cost with the number of units produced. Total cost incurred in the production process is considered.

To calculate: Unit product cost of two given products.

Answer 6

Chapter 4, Problem 8E

1

To determine

Activity based costing:

ABC is a method used in cost accounting that first identifies certain activities,then assigns cost to identified overhead activities and then allocate costs to products. Costs are assigned to products by building a relationship among costs, various activities and products.

Activity cost pool:

Activity cost pool includes all the costs that are incurred while performing one manufacturing process or task. It helps in getting an estimate of the accurate cost of a process.

An activity rate for all the activity cost pools.

Answer 7

Chapter 4, Problem 8E

1

To determine

Activity based costing:

ABC is a method used in cost accounting that first identifies certain activities,then assigns cost to identified overhead activities and then allocate costs to products. Costs are assigned to products by building a relationship among costs, various activities and products.

Activity cost pool:

Activity cost pool includes all the costs that are incurred while performing one manufacturing process or task. It helps in getting an estimate of the accurate cost of a process.

An activity rate for all the activity cost pools.

Answer 8

2

To determine

Unit product cost

Calculation of unit product cost is done by dividing total cost with the number of units produced. Total cost incurred in the production process is considered.

To calculate: Unit product cost of two given products.

Answer 9

2

To determine

Unit product cost

Calculation of unit product cost is done by dividing total cost with the number of units produced. Total cost incurred in the production process is considered.

To calculate: Unit product cost of two given products.

Answer 10

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Answer 11

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Answer 12

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Answer 13

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. 1AE Ch. 4 - Prob. 2AE

Solution Summary: The author explains the ABC method used in cost accounting that first identifies activities, then assigns cost to identified overhead activities and then allocates costs to products.

Videos

Unit product cost

Calculation of unit product cost is done by dividing total cost with the number of units produced. Total cost incurred in the production process is considered.

To calculate: Unit product cost of two given products.

Want to see the full answer?

Chapter 4 Solutions

Solution Summary: The author explains the ABC method used in cost accounting that first identifies activities, then assigns cost to identified overhead activities and then allocates costs to products.

Videos

Unit product cost Calculation of unit product cost is done by dividing total cost with the number of units produced. Total cost incurred in the production process is considered. To calculate: Unit product cost of two given products.

Want to see the full answer?

Chapter 4 Solutions

Unit product cost

Calculation of unit product cost is done by dividing total cost with the number of units produced. Total cost incurred in the production process is considered.

To calculate: Unit product cost of two given products.