Fundamental Managerial Accounting Concepts
Fundamental Managerial Accounting Concepts
8th Edition
ISBN: 9781259569197
Author: Thomas P Edmonds, Christopher Edmonds, Bor-Yi Tsay, Philip R Olds
Publisher: McGraw-Hill Education
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 5, Problem 5ESA

a

To determine

Allocate the cost of inspection among the products by assuming that it is driven unit-level activities.

a

Expert Solution
Check Mark

Explanation of Solution

Unit level cost:

The performance is based on every single unit of products or services. Examples are indirect labor, production supplies, and inspection costs.

The calculation of the allocation rate is as follows:

Allocation rate=Cost to be allocated (Inspection cost)Cost driver (Direct labor hours) =$540,00027,000 hours=$20 per direct labor hour

Hence, the allocation rate per direct labor hour is $20.

The calculation of the total cost allocated for high-caliber boards is as follows:

Allocated cost (high-caliber)=Labor hours×Per direct labor hour=6,000 hours×$20=$120,000

Hence, the allocated cost for high-caliber boards is $120,000.

The calculation of the total cost allocated for low-caliber boards is as follows:

Allocated cost (low-caliber)=Labor hours×Per direct labor hour=21,000 hours×$20=$420,000

Hence, the allocated cost for low-caliber boards is $420,000.

b

To determine

Allocate the cost of inspection among the products by assuming that it is driven batch-level activities.

b

Expert Solution
Check Mark

Explanation of Solution

Batch level cost:

Batch level is performed based on each group or batch. Examples are setup cost, quality control cost, and material handling cost.

The calculation of allocation rate is as follows:

Allocation rate=Cost to be allocated (Inspection cost)Cost driver (Number of batches) =$540,00040 batches=$13,500 per batch

Hence, the allocation rate per batch is $13,500.

The calculation of the total cost allocated for high-caliber boards is as follows:

Allocated cost (high-caliber)=Number of batches×Per batch=20 batches×$13,500=$270,000

Hence, the allocated cost for high-caliber boards is $270,000.

The calculation of the total cost allocated for low-caliber boards is as follows:

Allocated cost (low-caliber)=Number of batches×Per batch=20 batches×$13,500=$270,000

Hence, the allocated cost for low-caliber boards is $270,000.

c

To determine

Allocate the cost of inspection among the products by assuming it is driven product-level activities.

c

Expert Solution
Check Mark

Explanation of Solution

Product level cost:

Product level supports the products of particular services or products. Examples are specific to product advertising cost and engineering and design cost.

The calculation of the allocation rate is as follows:

Allocation rate=Cost to be allocated (Inspection cost)Cost driver (Number of inspectors) =$540,0005 inspectors=$108,000 per inspector

Hence, the allocation rate per inspector is $108,000.

The calculation of the total cost allocated for high-caliber boards is as follows:

Allocated cost (high-caliber)=Number of inspectors×Per inspector=3 inspectors×$108,000=$324,000

Hence, the allocated cost for high-caliber boards is $324,000.

The calculation of the total cost allocated for low-caliber boards is as follows:

Allocated cost (low-caliber)=Number of inspectors×Per inspector=2 inspectors×$108,000=$216,000

Hence, the allocated cost for low-caliber boards is $216,000.

d

To determine

Allocate the cost of inspection among the products by assuming that it is driven facility-level activities.

d

Expert Solution
Check Mark

Explanation of Solution

Facility level cost:

Facility level supports all the operations that are carried out in the company. Examples are landscaping cost and depreciation on manufacturing facility.

The calculation of the allocation rate is as follows:

Allocation rate=Cost to be allocated (Inspection cost)Cost driver (Number of square feet) =$540,000100,000 square feet=$5.40 per square feet

Hence, the allocation rate per square feet is $5.40.

The calculation of the total cost allocated for high-caliber boards is as follows:

Allocated cost (high-caliber)=Number of square feets×Per square feet=30,000 square feet×$5.40=$162,000

Hence, the allocated cost for high-caliber boards is $162,000.

The calculation of the total cost allocated for low-caliber boards is as follows:

Allocated cost (low-caliber)=Number of square feets×Per square feet=70,000 square feet×$5.40=$378,000

Hence, the allocated cost for low-caliber boards is $378,000.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 5 Solutions

Fundamental Managerial Accounting Concepts

Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY