Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 5, Problem 48P
To determine
Prepare the computation of material handling activity; using the activity based costing system to a friend who is not a business major.
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XYZ Ltd. is a manufacturing company that follows the cost allocation approach for overhead allocation. The company uses three cost pools for allocating overhead costs: Material Handling, Machine Maintenance, and Factory Utilities. Each cost pool has its own cost driver. For the current accounting period, the company incurred the following costs and activity levels:
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Material Handling Costs: $150,000
Cost Driver: Number of Material Orders - 2,500 orders
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Machine Maintenance Costs: $250,000
Cost Driver: Machine Hours - 10,000 hours
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Factory Utilities Costs: $200,000
Cost Driver: Direct Labor Hours - 5,000 hours
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Calculate the overhead allocation rate for each cost pool based on the given information.
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A) Material Handling: $60 per order, Machine Maintenance: $25 per hour, Factory Utilities: $40 per direct labor hour.
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B) Material Handling: $30 per order, Machine Maintenance: $25 per hour, Factory Utilities: $40 per direct labor hour.
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C) Material Handling: $60 per order, Machine…
Fletes Corporation manufactures two products: Product O95C and Product M31N. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products O95C and M31N.
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Activity Cost Pool
Activity Measure
Total Cost
Total Activity
Machining
Machine-hours
$
207,000
9,000
MHs
Machine setups
Number of setups
$
140,000
350
setups
Product design
Number of products
$
98,000
2
products
Order size
Direct labor-hours
$
340,000
10,000
DLHs
Â
Â
Activity Measure
Product O95C
Product M31N
Machine-hours
6,000
3,000
Number of setups
190
160
Number of products
1
1
Direct labor-hours
4,000
6,000
Â
Â
Using the ABC system, how much total manufacturing overhead cost would be assigned to Product O95C?
Glassworks Inc. produces two types of glass shelving, rounded edge and squared edge, on the same production line. For the current
period, the company reports the following dists.
Direct materials
Direct labor
Overhead (388% of direct labor cost)
Total cost
Quantity produced
Average cost per ft. (rounded)
Overhead Cost Category
(Activity Cost Pool)
Supervision
Depreciation of machinery
Assembly line preparation
Total overhead
Glassworks's controller wishes to apply activity-based costing (ABC) to allocate the $54,300 of overhead costs incurred by the two
product lines to see whether cost per foot would change markedly from that reported above. She has collected the following
information.
Overhead Cost Category
(Activity Cost Pool)
Supervision
Depreciation of machinery
Assembly line preparation
Supervision
Depreciation of machinery
Assembly line preparation
Rounded edge
Supervision
Depreciation of machinery
Assembly line preparation
Cost
$ 2,172
Squared edge
Components
21,128
$ 54,388…
Chapter 5 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 5 - Briefly explain how a traditional, volume-based...Ch. 5 - Prob. 2RQCh. 5 - Explain how an activity-based costing system...Ch. 5 - What are cost drivers? What is their role in an...Ch. 5 - List and briefly describe the four broad...Ch. 5 - How can an activity-based costing system alleviate...Ch. 5 - Prob. 7RQCh. 5 - How is the distinction between direct and indirect...Ch. 5 - Explain the concept of a pool rate in...Ch. 5 - Briefly explain two factors that tend to result in...
Ch. 5 - List three factors that are important in selecting...Ch. 5 - Prob. 12RQCh. 5 - Explain why a new product-costing system may be...Ch. 5 - Prob. 14RQCh. 5 - Are activity-based costing systems appropriate for...Ch. 5 - Explain why maintaining their medical-services...Ch. 5 - How could the administration at Immunity Medical...Ch. 5 - Prob. 18RQCh. 5 - Prob. 19RQCh. 5 - What is meant by the term activity analysis? Give...Ch. 5 - Prob. 21RQCh. 5 - What is meant by customer-profitability analysis?...Ch. 5 - Explain the relationship between customer profit...Ch. 5 - What is a customer profitability profile?Ch. 5 - Describe the use of practical capacity in a TDABC...Ch. 5 - Tioga Company manufactures sophisticated lenses...Ch. 5 - Urban Elite Cosmetics has used a traditional cost...Ch. 5 - Kentaro Corporation manufactures Digital Video...Ch. 5 - Kentaro Corporation manufactures Digital Video...Ch. 5 - Prob. 31ECh. 5 - Refer to the description given for Wheelco, Inc....Ch. 5 - Prob. 33ECh. 5 - United Technologies Corporation implemented...Ch. 5 - Redwood Company sells craft kits and supplies to...Ch. 5 - Non-value-added costs occur in nonmanufacturing...Ch. 5 - Since you have always wanted to be an...Ch. 5 - Prob. 39ECh. 5 - Prob. 42ECh. 5 - Prob. 44ECh. 5 - Borealis Manufacturing has just completed a major...Ch. 5 - Ontario, Inc. manufactures two products, Standard...Ch. 5 - Kitchen Kings Toledo plant manufactures three...Ch. 5 - Prob. 48PCh. 5 - Maxey Sons manufactures two types of storage...Ch. 5 - Prob. 50PCh. 5 - John Patrick has recently been hired as controller...Ch. 5 - The controller for Tulsa Medical Supply Company...Ch. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - World Gourmet Coffee Company (WGCC) is a...Ch. 5 - Knickknack, Inc. manufactures two products: Odds...Ch. 5 - Prob. 58PCh. 5 - Marconi Manufacturing produces two items in its...Ch. 5 - Gigabyte, Inc. manufactures three products for the...Ch. 5 - Refer to the new target prices for Gigabytes three...Ch. 5 - Prob. 62PCh. 5 - Prob. 63PCh. 5 - Midwest Home Furnishings Corporation (MHFC)...Ch. 5 - Fresno Fiber Optics, Inc. manufactures fiber optic...Ch. 5 - Refer to the information given in the preceding...Ch. 5 - Whitestone Company produces two subassemblies,...Ch. 5 - Morelli Electric Motor Corporation manufactures...Ch. 5 - Refer to the product costs developed in...Ch. 5 - Morelli Electric Motor Corporations controller,...
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