Managerial Accounting
17th Edition
ISBN: 9781260247787
Author: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Publisher: RENT MCG
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Chapter 7.A, Problem 5P
PROBLEM 7A-5 Time-Driven Activity-Based Costing LO 7-6, LO 7-7
Athens Company is conducting a time-driven activity-based costing study in its Engineering Department. To aid the study, the company provided the following data regarding its Engineering Department and the customers served by the department:
| New | Engineering | |||
| Product | Change | Product | ||
| Design | Orders | Testing | ||
| Hours per unit of the activity | . 40 |
20 | 8 | |
| Customer | Customer | Customer | All | |
| A | B | C | Customers | |
| Number of new products designed.... | . 3 |
2 | 4 | 180 |
| Number of engineering change orders ... | . 5 |
2 | 2 | 250 |
| Number of products tested | . 8 | 4 | 6 | 160 |
Required:
- Using the customer cost analysis shown in Exhibit 7A-2 as your guide, compute the following:
- The cost per hour of the resource supplied in the Engineering Department.
- The time-driven activity rate per hour for each of Athens’ three activities.
- The total engineering costs consumed by Customer A, Customer B, and Customer C.
- Using the capacity analysis shown in Exhibit 7A-3 as your guide, compute the following:
- The used capacity in hours.
- The unused capacity in hours.
- The unused capacity in number of employees. (Do not round your answer to a whole number.)
- The impact on expenses of matching capacity with demand. (Be sure to round your potential adjustment in the number of employees to a whole number.)
- Assume that Athens is considering expanding its business such that the estimated number of new products designed would increase to 250, the number of engineering change orders would jump to 320, and the number of products tested would rise to 240. Using these revised figures, calculate the following:
- The used capacity in hours.
- The unused capacity in hours.
- The unused capacity in number of employees. (Do not round your answer to a whole number.)
- The impact on expenses of matching capacity with demand. (Be sure to round your potential adjustment in the number of employees to a whole number.)
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Problem 2
Milky Corporation has provided the following data from its activity-based costing accounting system:
Activity Cost Pools
Designing products
Setting up batches
Assembling products
Total Cost
P1,372,448
P33,300
P126,160
Total Activity
7,798 product design hours
740 batch set-ups
6,640 assembly hours
The activity rate for the "designing products" activity cost pool is
answer must be in nearest peso
A
The activity rate for the "setting up batches" activity cost pool is
answer should be in nearest peso
A
The activity rate for the "assembling products" activity cost pool is
answer must be in nearest peso
A
Question 4
ABC Manufacturing uses activity-based costing. Each product consists of 20 separate parts totaling $95 in direct
materials, and requires 2.5 hours of machine time to produce. Additional information is as follows:
Acitivity
Materials handling
Machine operations
Assembling
Packaging
Allocation Base
Number of parts
Number of hours
Number of parts
Number of completed products
$0.09
$5.22
$0.35
$2.00
Cost Allocation Rate
What is the cost of materials handling per product? Enter your response with two decimals but without a comma or $
sign.
Question 3 Part I Advent Corporation has implemented an Activity Based Costing System. The company wants to useABC on its two main products, V1 and V2, and three main activities as follows:ActivityCost Driver Overhead Amount Total Driver VolumeIssuing Purchase Orders # of Purchase Orders $ 150,000 50,000Reviewing Receiving Reports # of Receiving Reports $ 175,000 20,000Making Phone Calls # of Phone Calls $ 450,000 100,000During the year:Product V1 required 150 purchase orders; 150 receiving reports; and 200 phone calls.Product V2 required100 purchase orders; 400 receiving reports; and 350 phone calls.
Required:a. Compute the pre-determined overhead rate for each cost pool. b. Compute the total manufacturing overhead cost for Product V1 and Product V2.
Chapter 7 Solutions
Managerial Accounting
Ch. 7.A - EXERCISE 7A-1 Time-Driven Activity-Based Costing...Ch. 7.A -
EXERCISE 7A-2 Time-Driven Activity-Based Costing...Ch. 7.A - EXERCISE 7A-3 Time-Driven Activity-Based Costing...Ch. 7.A - PROBLEM 7A-4 Time-Driven Activity-Based Costing LO...Ch. 7.A - PROBLEM 7A-5 Time-Driven Activity-Based Costing LO...Ch. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - What are unit-level, batch-level, product-level,...Ch. 7 - What types of costs should not be assigned to...
Ch. 7 - What are the two stages off allocation in...Ch. 7 - Why is the first stage of the allocation process...Ch. 7 - When activity-based costing is used, why do...Ch. 7 - Prob. 9QCh. 7 - Why is the form of activity-based costing...Ch. 7 - The Excel worksheet form that appears below is to...Ch. 7 - Prob. 2AECh. 7 - The Excel worksheet form that appears below is to...Ch. 7 - Prob. 1F15Ch. 7 - Prob. 2F15Ch. 7 - Prob. 3F15Ch. 7 - Prob. 4F15Ch. 7 - Prob. 5F15Ch. 7 - Prob. 6F15Ch. 7 - Prob. 7F15Ch. 7 - Prob. 8F15Ch. 7 - Prob. 9F15Ch. 7 - Prob. 10F15Ch. 7 - Prob. 11F15Ch. 7 - Prob. 12F15Ch. 7 - Prob. 13F15Ch. 7 - Prob. 14F15Ch. 7 - Prob. 15F15Ch. 7 - Prob. 1ECh. 7 - Prob. 2ECh. 7 - Prob. 3ECh. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - EXERCISE 7-7 First-Stage Allocations LO7-2
The...Ch. 7 - Prob. 8ECh. 7 - Prob. 9ECh. 7 - Prob. 10ECh. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - EXERCISE 7-13 Computing ABC Product Costs LO7-3,...Ch. 7 - Prob. 14ECh. 7 - Prob. 15ECh. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 -
PROBLEM 7-20 Evaluating the Profitability of...
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