Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 5, Problem 5.41P
Unused capacity, activity-based costing, activity-based management. Archer Pro manufactures two models of sport bows, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect
| Archer Pro Budgeted Costs and Activities for the Year Ended December 31, 2017 | |
| Direct materials—Basic bows | $ 450,000 |
| Direct materials—Deluxe bows | 320,000 |
| Direct manufacturing labor—Basic bows | 155,000 |
| Direct manufacturing labor—Deluxe bows | 195,000 |
| Indirect manufacturing labor costs | 105,000 |
| Machine setup costs | 60,000 |
| Equipment and maintenance costs | 264,000 |
| Facility rent | 250,000 |
| Total | $1799,000 |
Other budget information follows:
| Basic | Deluxe | |
| Number of bows | 10,000 | 5,000 |
| Machine-hours | 15,000 | 18,000 |
| Number of setups | 500 | 300 |
| Square footage of production space used | 4,000 | 3,500 |
- 1. Calculate the cost per unit of each cost-allocation base.
Required
- 2. What is the budgeted cost of unused capacity?
- 3. Calculate the budgeted total cost and the cost per unit for each model.
- 4. Why might excess capacity be beneficial for Archer Pro? What are some of the issues Archer Pro should consider before increasing production to use the space?
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Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow:
Direct Labor-Hours
per Unit
Hubs
Sprockets
Additional information about the company follows:
a. Hubs require $36 in direct materials per unit, and Sprockets require $10.
b. The direct labor wage rate is $13 per hour.
c. Hubs require special equipment and are more complex to manufacture than Sprockets.
d. The ABC system has the following activity cost pools:
0.80
0.40
Annual Production
20,000 units
50,000 units
Activity Cost Pool (Activity Measure)
Machine setups (number of setups)
Special processing (machine-hours)
General factory (organization-sustaining)
Required 1
Required 2
Required:
1. Compute the activity rate for each activity cost pool.
2. Determine the unit product cost of each product according to the ABC system.
Complete this question by entering your answers in the tabs below.
Compute the activity rate for each activity cost pool.
Activity Cost Pool
Machine setups
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Unused capacity, activity-based costing, activity-based management. Zarson’s Netballs is a manufacturer of high-quality basketballs and volleyballs. Setup costs are driven by the number of setups. Equipment and maintenance costs increase with the number of machine-hours, and lease rent is paid per square foot. Capacity of the facility is 14,000 square feet, and Zarson is using only 80% of this capacity.
Chapter 5 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
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Ch. 5 - Prob. 5.11QCh. 5 - Prob. 5.12QCh. 5 - Activity-based costing is the wave of the present...Ch. 5 - Increasing the number of indirect-cost pools is...Ch. 5 - The controller of a retail company has just had a...Ch. 5 - Conroe Company is reviewing the data provided by...Ch. 5 - Prob. 5.17MCQCh. 5 - Cost hierarchy. Roberta, Inc., manufactures...Ch. 5 - ABC, cost hierarchy, service. (CMA, adapted)...Ch. 5 - Alternative allocation bases for a professional...Ch. 5 - Plant-wide, department, and ABC Indirect cost...Ch. 5 - Plant-wide, department, and activity-cost rates....Ch. 5 - ABC, process costing. Sander Company produces...Ch. 5 - Department costing, service company. DLN is an...Ch. 5 - Activity-based costing, service company....Ch. 5 - Activity-based costing, manufacturing. Decorative...Ch. 5 - ABC, retail product-line profitability. Fitzgerald...Ch. 5 - Prob. 5.28ECh. 5 - Activity-based costing. The job-costing system at...Ch. 5 - ABC, product costing at banks,...Ch. 5 - Problems 5-31 Job costing with single direct-cost...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - Department and activity-cost rates, service...Ch. 5 - Activity-based costing, merchandising. Pharmahelp,...Ch. 5 - Choosing cost drivers, activity-based costing,...Ch. 5 - ABC, health care. Crosstown Health Center runs two...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - ABC, implementation, ethics. (CMA, adapted) Plum...Ch. 5 - Activity-based costing, activity-based management,...
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