1.
Concept Introduction:
Activity-based costing: Activity-based costing is one of the cost allocation methods where
The activity rates for each activity.
2.
Concept Introduction:
Activity-based costing: Activity-based costing is one of the cost allocation methods where overhead costs are allocated based on activity usage. It can be determined by using multiplying activity rate and activity usage. Activities can be classified as production, setups, design, and factory services.
The overhead costs per model.
3.
Concept Introduction:
Activity-based costing: Activity-based costing is one of the cost allocation methods where overhead costs are allocated based on activity usage. It can be determined by using multiplying activity rate and activity usage. Activities can be classified as production, setups, design, and factory services.
The product costs per unit for each model.
4.
Concept Introduction:
Activity-based costing: Activity-based costing is one of the cost allocation methods where overhead costs are allocated based on activity usage. It can be determined by using multiplying activity rate and activity usage. Activities can be classified as production, setups, design, and factory services.
The difference between the selling price and product cost for each model.
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- Roberts Company produces two weed eaters: basic and advanced. The company has four activities: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below. Overhead costs: Required: 1. Calculate the four activity rates. 2. Calculate the unit costs using activity rates. Also, calculate the overhead cost per unit. 3. What if consumption ratios instead of activity rates were used to assign costs instead of activity rates? Show the cost assignment for the inspection activity.arrow_forwardElectan Company produces two types of printers. The company uses ABC, and all activity drivers are duration drivers. Electan Company is considering using DBC and has gathered the following data to help with its decision. A. Activities with duration drivers: B. Activities with consumption ratios and costs: C. Products with cycle time and practical capacity: Required: 1. Using cycle time and practical capacity for each product, calculate the total time for all primary activities. Comment on the relationship to ABC. 2. Calculate the overhead rate that DBC uses to assign costs. Comment on the relationship to a unit-based plantwide overhead rate. 3. Use the overhead rate calculated in Requirement 2 to calculate (a) the overhead cost per unit for each product, and (b) the total overhead assigned to each product. How does this compare to the ABC assignments shown in Part B of the Information set? 4. What if the units actually produced were 10,000 for Printer A and 18,000 for Printer B. Using DBC, calculate the cost of unused capacity.arrow_forwardLarsen, Inc., produces two types of electronic parts and has provided the following data: There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plantwide rate? Which product is undercosted? 3. What if the machine hours were used for the plantwide rate? Would this remove the cost distortion of a plantwide rate?arrow_forward
- Wrappers Tape makes two products: Simple and Removable. It estimates it will produce 369,991 units of Simple and 146,100 of Removable, and the overhead for each of its cost pools is as follows: It has also estimated the activities for each cost driver as follows: Â How much is the overhead allocated to each unit of Simple and Removable?arrow_forwardRefer to the data given in Problem 4.36 and suppose that the expected activity costs are reported as follows (all other data remain the same): The per unit overhead cost using the 14 activity-based drivers is 1,108 and 779 for Cylinder A and Cylinder B, respectively. Required: 1. Determine the percentage of total costs represented by the three most expensive activities. 2. Allocate the costs of all other activities to the three activities identified in Requirement 1. Allocate the other activity costs to the three activities in proportion to their individual activity costs. Now assign these total costs to the products using the drivers of the three chosen activities. 3. Using the costs assigned in Requirement 2, calculate the percentage error using the ABC costs as a benchmark. Comment on the value and advantages of this ABC simplification.arrow_forwardClassifying costs Wheels, Inc. manufactures wheels for bicycles, tricycles, and scooters. For each cost given below, determine if the cost is a product cost or a period cost. If the cost is a product cost, further determine if the cost is direct materials (DM), direct labor (DL), or manufacturing overhead (MOH) and then determine if the product cost is a prime cost, conversion cost, or both. If the cost is a period cost, further determine if the cost is a selling expense or administrative expense (Admin). Cost (a) is answered as a guidearrow_forward
- Using ABC to compute product costs per unit Spectrum Corp. makes two products: C and D. The following data have been summarized: The company plans to manufacture 250 units of each product. Calculate the product cost per unit for Products C and D using activity-based costing.arrow_forwardYour Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: Estimated Expected Activity Activity Cost Pool Cost Product A Product B Total Activity 1 $17,600 700 300 1,000 Activity 2 $32,600 600 200 800 Activity 3 $52.500 900 500 1,400 What is the activity rate under the activity-based costing system for Activity 1? O $17.60 $58.33 O $37.50 $40.75. O $25.14arrow_forwardChrzan, Incorporated, manufactures and sells two products: Product EO and Product NO. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Product E0 Product Ne Total direct labor-hours Activity Cost Pools Labor-related Production orders Order size The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Overhead Cost Multiple Choice $33.94 per MH $54.20 per MH Direct Expected Labor-Hours Production Per Unit 10.1 410 1,550 9.1 $51.98 per MH $21.40 per MH Activity Measures DLHS orders MHs Total Direct Labor- Hours $ 301,890 61,087 585,366 $948,343 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: 4,141 14, 105 18,246 Product E 4,141 850 5,550 Expected Activity Product NO 14, 105 950 5,250 Total 18,246 1,800 10,800arrow_forward
- Northwest Company produces two types of glass shelving: rounded edge and squared edge. The company reports the following cost data. Rounded Edge $ 34,800 11,600 Squared Edge $ 46,800 $ 81,600 31,200 Total Direct materials Direct labor Overhead (using plantwide rate) 42,800 41,400 79,400 120,800 2$ 245, 200 $ Total product cost $ 87,800 157,400 Units produced Product cost per unit 11,600 $ 7.57 15,600 $ 10.09 Northwest's controller wants to apply activity-based costing to allocate the $120,800 of overhead cost to the two products to see whether product cost per unit would change markedly from that above. The company's budgeted activity usage equals its actual activity usage for the period. The following additional information is collected. Rounded Edge 149 orders Activity Usage Squared Edge 471 orders Budgeted Cost Activity Cost Driver Purchase orders Activity Purchasing Depreciation of machinery Setup Total 620 orders $ 6,200 63,000 Machine hours 500 hours 1,500 hours 2,000 hours…arrow_forward! Required information [The following information applies to the questions displayed below.] For many years, Thomson Company manufactured a single product called LEC 40. Then three years ago, the company automated a portion of its plant and at the same time introduced a second product called LEC 90 that has become increasingly popular. The LEC 90 is a more complex product, requiring 0.60 hours of direct labor time per unit to manufacture and extensive machining in the automated portion of the plant. The LEC 40 requires only 0.20 hours of direct labor time per unit and only a small amount of machining. Manufacturing overhead costs are currently assigned to products on the basis of direct labor-hours. Despite the growing popularity of the company's new LEC 90, profits have been declining steadily. Management is beginning to believe that there may be a problem with the company's costing system. Direct material and direct labor costs per unit are as follows: Direct materials Direct labor…arrow_forwardYour Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: Estimated Expected Activity Activity Cost Pool Cost Product A Product B Total Machine related $17,600 700 300 1,000 MH Batch setup $32,600 600 200 800 Setups Other $52,500 900 500 1,400 DLH What is the activity rate under the activity-based costing system for Batch setups? Group of answer choices $54.33 $40.75 $40.75 per Setup $16.30 $16.30 per Setup $54.33 per Setuparrow_forward
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