Download Capítulo 8 Activity-Based Costing and more Exercises Engineering in PDF only on Docsity!
Capítulo 8 Activity-Based Costing
Exercise 4- 2 (15 minutes)
- The activity rates are computed as follows: Activity Cost Pool (a) Estimated Overhead Cost (b) Expected Activity (a) ÷ (b) Activity Rate Labor related ................................... $ 52,000 8,000 DLHs $ 6.50 per DLH Machine related ............................... 15,000 20,000 MHs 0.75 per MH Machine setups ................................ 42,000 1,000 setups 42.00 per setup Production orders ............................ 18,000 500 orders 36.00 per order Product testing ................................. 48,000 2,000 tests 24.00 per test Packaging ........................................ 75,000 5,000 packages 15.00 per package General factory ................................ 108,800 8,000 DLHs 13.60 per DLH Total ................................................ $358,
- The predetermined overhead rate based entirely on direct labor-hours would be computed as follows: Total estimated overhead cost (a) ................................. $358, Total expected direct labor-hours (b) ............................ 8,000 DLHs Predetermined overhead rate (a) ÷ (b)........................... $ 44.85 per DLH
Exercise 4- 3 (30 minutes) The unit product costs for the products are a combination of direct materials, direct labor, and overhead costs. The overhead costs assigned to each product would be computed as follows: J78 B Expected Activity Amount Expected Activity Amount Labor related, at $7.00 per direct labor-hour ................................ 1,000 $ 7,000 40 $ 280 Machine related, at $3.00 per machine-hour ................................ 3,200 9,600 30 90 Machine setups, at $40.00 per setup ............................................. 5 200 1 40 Production orders, at $160.00 per order ....................................... 5 800 1 160 Shipments, at $120.00 per shipment ............................................. 10 1,200 1 120 General factory, at $4.00 per direct labor-hour ............................ 1,000 4,000 40 160 Total overhead cost assigned (a)................................................... $22,800 $ 850 Number of units produced (b) ...................................................... 4,000 100 Overhead cost per unit (a) ÷ (b) .................................................... $ 5.70 $8. The unit product costs combine direct materials, direct labor, and overhead costs as follows: J78 B Direct materials ...................................................................... $ 6.50 $31. Direct labor ............................................................................ 3.75 6. Manufacturing overhead (see above)..................................... 5.70 8. Unit product cost.................................................................... $15.95 $45.
Exercise 4- 7 (continued)
- The unit product costs with the proposed ABC system can be computed as follows: Activity Cost Pool Estimated Overhead Cost* (b) Expected Activity (a) ÷ (b) Activity Rate Labor related ........................ $168,000 12,000 direct labor-hours $14.00 per direct labor-hour Engineering design ............... 168,000 8,000 engineering-hours $21.00 per engineering-hour $336, *The total manufacturing overhead cost is split evenly between the two activity cost pools. Manufacturing overhead is assigned to the two products as follows: Mercon Wurcon Expected Expected Activity Amount Activity Amount Labor related, at $14.00 per direct labor-hour ................................... 2,000 $ 28,000 10,000 $140, Engineering design, at $21.00 per engineering-hour ......................... 4,000 84,000 4,000 84, Total overhead cost assigned (a) ........................................................ $112,000 $224, Number of units produced (b) ............................................................ 10,000 40, Overhead cost per unit (a) ÷ (b) ......................................................... $11.20 $5.
The unit product costs combine direct materials, direct labor, and manufacturing overhead costs: Mercon Wurcon Direct materials .................................................... $10.00 $ 8. Direct labor .......................................................... 3.00 3. Manufacturing overhead (see above)................... 11.20 5. Unit product cost.................................................. $24.20 $17.
- The unit product cost of the high-volume product, Wurcon, declines under the activity-based costing system, whereas the unit product cost of the low-volume product, Mercon, increases. This occurs because half of the overhead is applied on the basis of engineering design-hours instead of direct labor-hours. When the overhead was applied on the basis of direct labor-hours, most of the overhead was applied to the high-volume product. However, when the overhead is applied on the basis of engineering-hours, more of the overhead cost is shifted over to the low-volume product. Engineering design is a product-level activity, so the higher the volume, the lower the unit cost and the lower the volume, the higher the unit cost. Exercise 4- 10 (30 minutes)
- Under the traditional direct labor-hour based costing system, manufacturing overhead is applied to products using the predetermined overhead rate computed as follows:
Predetermined Estimated total manufacturing overhead cost
overhead rate Estimated total direct labor - hours
= = $20.00 per DLH
110,000 DLHs *
*25,000 units of Xactive @ 1.4 DLH per unit + 75,000 units of the Pathbreaker @ 1.0 DLH per unit = 35,000 DLHs + 75, DLHs = 110,000 DLHs Consequently, the unit product costs using the traditional approach would be computed as follows:
Number of units (b) ....................... 25,000 75, Unit product cost (a) ÷ (b) ............. $123.88 $79.
- The traditional system uses one unit-level activity measure, direct labor hours, to assign 31.8% ($700,000 ÷ $2,200,000) of all overhead to the Xactive product line and 68.2% ($1,500,000 ÷ $2,200,000) of all overhead to the Pathbreaker product line. The ABC system assigns 62.5% ($425,000 ÷ $680,000) of Batch setup costs (a batch-level activity) to the Xactive product line and 37.5% ($255,000 ÷ $680,000) to the Pathbreaker product line. The ABC system assigns 50% ($325,000 ÷ $650,000) of Product sustaining costs (a product-level activity) to each product line. Problem 4- 14 (60 minutes)
- The first step is to determine the activity rates: Serving a Party Serving a Diner Serving Drinks Total cost (a) .............................................. $32,800 $211,200 $69, Total activity (b) ........................................ 8,000 parties 32,000 diners 58,000 drinks Cost per unit of activity (a)÷(b) ................. $4.10 per party $6.60 per diner $1.20 per drink
- According to the ABC system, the cost of serving each of the parties can be computed as follows: Serving a Party Serving a Diner Serving Drinks Cost per unit of activity ............ $4.10 per party $6.60 per diner $1.20 per drink a. A party of four diners who order three drinks: 1 4 3 party diners drinks Cost .......................................... $4.10 $26.40 $3.60 $34. b. A party of two diners who order no drinks: 1 2 0
party diners drinks Cost .......................................... $4.10 $13.20 $0.00 $17. c. A lone diner who orders two drinks: 1 1 2 party diner drinks Cost .......................................... $4.10 $6.60 $2.40 $13.
