Managerial Accounting: Creating Value in a Dynamic Business Environment
11th Edition
ISBN: 9781259569562
Author: Ronald W Hilton Proffesor Prof, David Platt
Publisher: McGraw-Hill Education
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Chapter 5, Problem 49P
Maxey & Sons manufactures two types of storage cabinets—Type A and Type B—and applies manufacturing
The controller, who is studying the use of activity-based costing, has determined that the firm’s overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activities’ three respective cost drivers, follow.
The firm’s total overhead of $3,080,000 is subdivided as follows: manufacturing setups, $672,000; machine processing. $1,848,000: and product shipping, $560,000.
Required:
- 1. Compute the unit
manufacturing cost of Type A and Type B storage cabinets by using the company’s current overhead costing procedures. - 2. Compute the unit manufacturing cost of Type A and Type B storage cabinets by using activity-based costing.
- 3. Is the cost of the Type A storage cabinet overstated or understated (i.e., distorted) by the use of machine hours to allocate total manufacturing overhead to production? By how much?
- 4. Assume that the current selling price of a Type A storage cabinet is $260 and the marketing manager is contemplating a $30 discount to stimulate volume. Is this discount advisable? Briefly discuss.
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Maxey & Sons manufactures two types of storage cabinets-Type A and Type B—and applies manufacturing overhead to all units at
the rate of $140 per machine hour. Production information follows.
Descriptions
Anticipated volume (units)
Direct-material cost per unit
Direct-labor cost per unit
Descriptions
The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with three
activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and
outgoing shipments, which are the activities' three respective cost drivers, follow.
Setups
Machine hours
Outgoing shipments
Туре А
160
56,000
200
Туре А
28,000
$38
43
Required 1 Required 2 Required 3
Туре В
Unit manufacturing costs
120
78,750
150
The firm's total overhead of $18,865,000 is subdivided as follows: manufacturing setups, $4,116,000; machine processing, $11,319,000
and product shipping, $3,430,000.
Required:
1. Compute…
Maxey & Sons manufactures two types of storage cabinets-Type A and Type B-and applies manufacturing overhead to all units at
the rate of $120 per machine hour. Production information follows.
Descriptions
Anticipated volume (units)
Direct-material cost per unit
Direct-labor cost per unit
Descriptions
The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with three
activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and
outgoing shipments, which are the activities' three respective cost drivers, follow.
Setups
Machine hours
Outgoing shipments
Type A
140
48,000
200
Required 1 Required 2 Required 3
Type A
24,000
$ 28
33
The firm's total overhead of $13,860,000 is subdivided as follows: manufacturing setups, $3,024,000; machine processing,
$8,316,000; and product shipping, $2,520,000.
Required:
1. Compute the unit manufacturing cost of Type A and Type…
Maxey & Sons manufactures two types of storage cabinets-Type A and Type B-and applies manufacturing
overhead to all units at the rate of $160 per machine hour. Production information follows.
Anticipated volume (units)
Direct-material cost per unit
Direct-labor cost per unit
Setups
Machine hours
Outgoing shipments
The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can
be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on
the number of setups, machine hours, and outgoing shipments, which are the activities' three respective cost
drivers, follow.
Type A
180
64,000
200
Required 1 Required 2
Type A
32,000
Unit manufacturing costs
$
Required 3
$
The firm's total overhead of $24,640,000 is subdivided as follows: manufacturing setups, $5,376,000; machine
processing, $14,784,000; and product shipping, $4,480,000.
48 $
53
Type B
140
90,000
150
Required:
1. Compute the unit…
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 - Big Apple Design Company specializes in designing...Ch. 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 - Better Bagels, Inc. manufactures a variety of...Ch. 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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