Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: Budgeted manufacturing overhead costs: Plant Maintenance PM (Support Dept) Data Processing DP (Support Dept) $350,000 M (Operating Dept) C (Operating Dept) $ 75,000 $225,000 $125,000 Services furnished. Machining Capping By Plant Maintenance (budgeted labor-hours): to Data Processing to Machining to Capping 3,500 labor-hours 5,000 labor-hours 8,200 labor-hours By Data Processing (budgeted computer hours): to Plant Maintenance to Machining to Capping 600 computer hours 3,500 computer hours 600 computer hours What is the true cost (complete reciprocated cost) of the Plant Maintenance Department? Example of Answer: 4000 (No comma, space, decimal point, or $ sign) A/

Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: Budgeted manufacturing overhead costs: Plant Maintenance PM (Support Dept) Data Processing DP (Support Dept) $350,000 M (Operating Dept) C (Operating Dept) $ 75,000 $225,000 $125,000 Services furnished. Machining Capping By Plant Maintenance (budgeted labor-hours): to Data Processing to Machining to Capping 3,500 labor-hours 5,000 labor-hours 8,200 labor-hours By Data Processing (budgeted computer hours): to Plant Maintenance to Machining to Capping 600 computer hours 3,500 computer hours 600 computer hours What is the true cost (complete reciprocated cost) of the Plant Maintenance Department? Example of Answer: 4000 (No comma, space, decimal point, or $ sign) A/

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 11E: Lonsdale Inc. manufactures entry and dining room lighting fixtures. Five activities are used in...

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Lonsdale Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows: Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow: a. Determine the activity rate for each activity. b. Use the activity rates in (a) to determine the total and per-unit activity costs associated with each product. Round to the nearest cent.
The controller for Muir Companys Salem plant is analyzing overhead in order to determine appropriate drivers for use in flexible budgeting. She decided to concentrate on the past 12 months since that time period was one in which there was little important change in technology, product lines, and so on. Data on overhead costs, number of machine hours, number of setups, and number of purchase orders are in the following table. Required: 1. Calculate an overhead rate based on machine hours using the total overhead cost and total machine hours. (Round the overhead rate to the nearest cent and predicted overhead to the nearest dollar.) Use this rate to predict overhead for each of the 12 months. 2. Run a regression equation using only machine hours as the independent variable. Prepare a flexible budget for overhead for the 12 months using the results of this regression equation. (Round the intercept and x-coefficient to the nearest cent and predicted overhead to the nearest dollar.) Is this flexible budget better than the budget in Requirement 1? Why or why not?
The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed; thus, they must be broken into their fixed and variable elements so that the cost behavior of the power usage activity can be properly described. Machine hours have been selected as the activity driver for power costs. The following data for the past eight quarters have been collected: Required: 1. Prepare a scattergraph by plotting power costs against machine hours. Does the scatter-graph show a linear relationship between machine hours and power cost? 2. Using the high and low points, compute a power cost formula. 3. Use the method of least squares to compute a power cost formula. Evaluate the coefficient of determination. 4. Rerun the regression and drop the point (20,000; 26,000) as an outlier. Compare the results from this regression to those for the regression in Requirement 3. Which is better?
Young Company is beginning operations and is considering three alternatives to allocate manufacturing overhead to individual units produced. Young can use a plantwide rate, departmental rates, or activity-based costing. Young will produce many types of products in its single plant, and not all products will be processed through all departments. In which one of the following independent situations would reported net income for the first year be the same regardless of which overhead allocation method had been selected? a. All production costs approach those costs that were budgeted. b. The sales mix does not vary from the mix that was budgeted. c. All manufacturing overhead is a fixed cost. d. All ending inventory balances are zero.
The controller of the South Charleston plant of Ravinia, Inc., monitored activities associated with materials handling costs. The high and low levels of resource usage occurred in September and March for three different resources associated with materials handling. The number of moves is the driver. The total costs of the three resources and the activity output, as measured by moves for the two different levels, are presented as follows: Required: 1. Determine the cost behavior formula of each resource. Use the high-low method to assess the fixed and variable components. 2. Using your knowledge of cost behavior, predict the cost of each item for an activity output level of 9,000 moves. 3. Construct a cost formula that can be used to predict the total cost of the three resources combined. Using this formula, predict the total materials handling cost if activity output is 9,000 moves. In general, when can cost formulas be combined to form a single cost formula?
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Procurement Scheduling Materials handling Product development Production Disk drives Tape drives Wire drives Activity Cost $378,400 221,900 402,900 770,700 Number of engineering changes 1,402,800 Machine hours Number of Purchase Orders Activity Base Number of purchase orders Number of production orders Number of moves 4,160 2,100 11,100 Production Orders Number of Number of Moves 250 175 1,200 540 860 4,300 The activity rate for the materials handling cost pool is Oa. $63.76 per move Ob. $21.8 per move Oc. $172.68 per move Od. $66.71 per move Number of Engineering Machine Changes Hours 15 2,500 5 9,200 10,300 27 Number of Units 1,600 4,300 2,000
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Procurement Scheduling Materials handling Product development Production Activity Cost Activity Base $362,500 Number of purchase orders 244,700 Number of production orders 486,700 Number of moves 766,200 Number of engineering changes 1,535,800 Machine hours Disk drives Tape drives Wire drives Number of Number of Number Number of of Moves Purchase Orders Production Orders 4,090 270 2,400 225 11,900 760 The activity-based cost for each disk drive unit is Oa. $665.88 Ob. $300.73 Oc. $208.11 Od. $19.71 1,240 780 3,500 Engineering Changes 15 6 25 Machine Hours 2,500 10,000 10,200 Number of Units 2,200 4,500 2,700
Management Accounting Company B is interested in using the reciprocal allocation method. The following data from operations were collected for analysis: Budgeted manufacturing overhead costs: Plant Maintenance PM (Support Dept) $350,000 Data Processing DP (Support Dept) $75,000 Machining M (Operating Dept) $225,000 Capping C (Operating Dept) $125,000 Services furnished: By Plant Maintenance (budgeted labour-hours): to Data Processing 3,500 to Machining 5,000 to Capping 8,200 By Data Processing (budgeted computer time): to Plant Maintenance 600 to Machining 3,500 to Capping 600 Required : a. What is the complete reciprocated cost of the Plant Maintenance Department? b. What is the complete reciprocated cost of the Data Processing Department? c. "The direct allocation method incorporates mutual services provided among all support departments."…
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Activity Cost Activity Base Procurement $364,200 Number of purchase orders Scheduling 243,400 Number of production orders Materials handling 417,300 Number of moves Product development 773,900 Number of engineering changes Production 1,428,300 Machine hours Number of Number of Number Number of Number Purchase Production of Engineering Machine of Orders Orders Moves Changes Hours Units Disk drives 4,120 270 1,500 11 2,200 2,100 Tape drives 2,400 245 500 7 8,500 3,500 Wire drives 11,500 790 3,500 21 10,700 2,400 The activity-based cost for each tape drive unit is Oa. $291.69 Ob. $239.52 Oc. $740.06 Od. $20.21
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Activity Cost Activity Base Procurement $339,200 Number of purchase orders Scheduling 204,100 Number of production orders Materials handling 459,900 Number of moves Product development 775,100 Number of engineering changes Production 1,593,800 Machine hours Number ofPurchaseOrders Number ofProductionOrders NumberofMoves Number ofEngineeringChanges MachineHours NumberofUnits Disk drives 4,050 260 1,370 10 2,300 2,500 Tape drives 1,600 125 600 3 8,700 4,200 Wire drives 12,000 780 3,700 30 10,600 2,000 The activity rate for the scheduling activity cost pool is
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Activity Cost Activity Base Procurement $309,800 Number of purchase orders Scheduling 207,900 Number of production orders Materials handling 427,200 Number of moves Product development 787,800 Number of engineering changes Production 1,508,300 Machine hours Number ofPurchaseOrders Number ofProductionOrders NumberofMoves Number ofEngineeringChanges MachineHours NumberofUnits Disk drives 3,930 330 1,340 11 1,800 1,800 Tape drives 2,400 165 710 4 8,100 3,600 Wire drives 13,000 700 4,400 20 10,400 2,100 The activity-based cost for each disk drive unit is a.$878.32 b.$16.03 c.$328.05 d.$223.91
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Procurement Scheduling Materials handling Product development Production Disk drives Tape drives Wire drives Activity Cost Activity Base $392,400 Number of purchase orders 233,100 Number of production orders 409,400 Number of moves 708,700 Number of engineering changes 1,526,300 Machine hours Number of Purchase Orders Number of Number Number of of Moves Engineering Changes 11 7 23 Production Orders 4,090 280 1,800 185 12,000 910 The activity-based cost for each disk drive unit is Oa. $793.58 Ob. $21.93 Oc. $235.34 Od. $191.6 1 1,410 740 4,500 Machine Hours 1,800 8,300 11,500 Number of Units 2,300 4,300 2,400