A9 Thornton Manufacturing produces two keyboards, one for laptop computers and the other for desktop computers. The productionprocess is automated, and the company has found activity-based costing useful in assigning overhead costs to its products. Thecompany has identified five major activities involved in producing the keyboards.ActivityMaterials receiving & handlingProduction setupAssemblyQuality inspectionPacking and shippingAllocation BaseCost of materialNumber of setupsNumber of partsInspection timeNumber of ordersActivity measures for the two kinds of keyboards follow:Allocation Rate3% of material cost$112.00 per setup$ 6.00 per part$ 1.20 per minute$ 11.00 per orderLaptopsDesktopsLabor Cost$ 1,2101,100MaterialCost$ 5,6007,300Setups28Number of Number ofParts441328Inspection Time6,900 minutes4,800 minutesNumber ofOrders6617Requireda. Compute the cost per unit of laptop and desktop keyboards, assuming that Thornton made 340 units of each type of keyboard.Note: Round your answers to 2 decimal places.Cost Per UnitLaptop keyboardsDesktop keyboards

Step 1:Computation of the total overhead costs assigned to each keyboard:Total overhead costs…

Answered: Thornton Manufacturing produces two…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 4CE: Larsen, Inc., produces two types of electronic parts and has provided the following data: There are...

See similar textbooks

Similar questions

Reducir, Inc., produces two different types of hydraulic cylinders. Reducir produces a major subassembly for the cylinders in the Cutting and Welding Department. Other parts and the subassembly are then assembled in the Assembly Department. The activities, expected costs, and drivers associated with these two manufacturing processes are given below. Note: In the assembly process, the materials-handling activity is a function of product characteristics rather than batch activity. Other overhead activities, their costs, and drivers are listed below. Other production information concerning the two hydraulic cylinders is also provided: Required: 1. Using a plantwide rate based on machine hours, calculate the total overhead cost assigned to each product and the unit overhead cost. 2. Using activity rates, calculate the total overhead cost assigned to each product and the unit overhead cost. Comment on the accuracy of the plantwide rate. 3. Calculate the global consumption ratios. 4. Calculate the consumption ratios for welding and materials handling (Assembly) and show that two drivers, welding hours and number of parts, can be used to achieve the same ABC product costs calculated in Requirement 2. Explain the value of this simplification. 5. Calculate the consumption ratios for inspection and engineering, and show that the drivers for these two activities also duplicate the ABC product costs calculated in Requirement 2.
Larsen, 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?
Rex Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are: Compute the overhead rate for each activity.
Nonunit-level drivers are prominent in activity-based coting systems. Which of the following is a nonunit-level driver? a. Machine hours b. Direct materials c. Assembly hours d. Setup hours
Rocks Industries has identified three different activities as cost drivers: machine setups, machine hours, and inspections. The overhead and estimated usage are: Compute the overhead rate for each activity.
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?
The following items are associated with a traditional cost accounting information system, an activity-based cost accounting information system, or both (that is, some elements are common to the two systems): a. Usage of direct materials b. Direct materials cost assigned to products using direct tracing c. Direct labor cost incurrence d. Direct labor cost assigned to products using direct tracing e. Setup cost incurrence f. Setup cost assigned using number of setups as the activity driver g. Setup cost assigned using direct labor hours as the activity driver h. Cost accounting personnel i. Submission of a bid, using product cost plus 25 percent j. Purchasing cost incurrence k. Purchasing cost assigned to products using direct labor hours as the activity driver l. Purchasing cost assigned to products using number of orders as the activity driver m. Materials handling cost incurrence n. Materials handling cost assigned using the number of moves as the activity driver o. Materials handling cost assigned using direct labor hours as the activity driver p. Computer q. Costing out of products r. Decision to continue making a part rather than buying it s. Printer t. Customer service cost incurred u. Customer service cost assigned to products using number of complaints as the activity driver v. Report detailing individual product costs w. Commission cost x. Commission cost assigned to products using units sold as the activity driver y. Plant depreciation z. Plant depreciation assigned to products using direct labor hours Required: 1. For each cost system, classify the relevant items into one of the following categories: a. Interrelated parts b. Processes c. Objectives d. Inputs e. Outputs f. User actions 2. Explain the choices that differ between the two systems. Which system will provide the best support for the user actions? Explain. 3. Draw an operational model that illustrates each cost accounting systemwith the items that belong to the system used as examples for each component of the model. 4. Based on the operational models, comment on the relative costs and benefits of the two systems. Which system should be chosen?
Gibson Manufacturing produces two keyboards, one for laptop computers and the other for desktop computers. The production process is automated, and the company has found activity-based costing useful in assigning overhead costs to its products. The company has identified five major activities involved in producing the keyboards. Activity Materials receiving & handling Production setup Assembly Quality inspection Packing and shipping Activity measures for the two kinds of keyboards follow: Laptops Desktops Required Allocation Base Cost of material Number of setups Number of parts Inspection time Number of orders Labor Cost $ 1,190 1,080 Material Number of Number of Cost $ 5,600 7,500 Setups 31 11 Parts 47 28 Allocation Rate 2% of material cost $ 113.00 per setup $ 5.00 per part $ 1.30 per minute $ 12.00 per order Number of Inspection Time Orders 6,800 minutes 5,200 minutes 67 22 a. Compute the cost per unit of laptop and desktop keyboards, assuming that Gibson made 210 units of each…
Kingston Industries manufactures two types of computerized scoreboards, custom and standard,each of which involves three manufacturing processes, namely: cutting, assembly and packaging.The company uses an activity-based costing system to allocate its overhead cost to themanufacturing processes.In using the activity-based costing system, the company uses four overhead activities; productionset-up, procurement, quality control and materials management, in each production department.An activity analysis of the overhead related to the cutting department revealed the followingestimated costs and activity bases for the four overhead activities:Activity Costs Activity Base $Production set-up 43 200 Number of set-upsProcurement 156 000 Number of purchase ordersQuality control 175 000 Number of inspectionsMaterials management 150 000 Number of componentsTotal 524 200The activity based usage quantities for each product in the cutting department are as follows: Set-ups…
Warren Furniture produces three models of desk chairs: Basic, Ergo, and Exec. The cost system at the Warren production facility allocates overhead cost on the basis of direct labor hours. The company is considering updating its cost system to an activity-based costing system and is interested in understanding the effects. A study team composed of the production facility's finance and operations groups has identified three overhead cost pools along with appropriate cost drivers for each pool. Cost Pools Assembly Setup Quality assurance Costs $ 2,925,000 1,023,000 642,000 Activity Drivers Direct labor-hours Number of setups Number of tests The plans for production for the next year and the budgeted direct costs and activity by product line are as follows: Direct costs (material and labor) Basic $ 1,006,800 Direct labor-hours 25,200 Products Ergo $ 1,143,000 12,000 Exec $ 868,800 Machine-hours 29,200 17,200 Number of setups Number of tests Number of units produced 48 140 7,200 72 100…
Aresco Corporation manufactures two products: Product G51B and Product E48X. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products G51B and E48X. Activity Cost Pool Machining Machine setups Product design Order size Activity Measure Machine-hours Number of setups Number of products Direct labor-hours Activity Measure Machine-hours Number of setups Number of products Direct labor-hours Product G51B 2,180 252 1 3,180 Total Cost $ 104,500 $ 304,500 $ 84,500 $ 381,500 Product E48X 2,820 248 1 6,820 Total Activity 5,000 MHS 500 setups 2 products 10,000 DLHS Required: a. Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product G51B? b. Using the plantwide overhead rate, what percentage of the total…
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below: Processing Supervising Other Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the other activity cost pool are not assigned to products. Activity data appear below: Product MO Product M5 Total $ 3,800 $ 23,800 $ 10,400 MHs (Processing) 9,700 300 10,000 Sales (total) Direct materials (total) Direct labor (total) Batches (Supervising) 500 500 1,000 Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. Product Mº $ 74,100 $ 28,500 $ 27,800 Product M5 $ 89,900 $ 31,400 $ 41,700

SEE MORE QUESTIONS

Recommended textbooks for you

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

SEE MORE TEXTBOOKS