Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 12, Problem 4CE
Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity:
- Four welding units, with a lease cost of $12,000 per year per unit
- Six welding employees each paid a salary of $50,000 per year (A total of 9,000 welding hours are supplied by the six workers.)
- Welding supplies: $300 per job
- Welding hours: Three hours used per job
During the year, the activity operated at 90 percent of capacity and incurred the actual activity and resource costs, shown on page 676.
- Lease cost: $48,000
- Salaries: $315,000
- Parts and supplies: $805,000
Required:
- 1. Prepare a flexible budget formula for the welding activity using welding hours as the driver.
- 2. Prepare a performance report for the welding activity.
- 3. What if welders were hired through outsourcing and paid $30 per hour (the welding equipment is provided by Foy)? Repeat Requirement 1 for the outsourcing case.
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Activity-Based Flexible Budgeting
Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity:
• Four welding units, with a lease cost of $15,000 per year per unit
• Six welding employees each paid a salary of $58,000 per year (A total of 12,000 welding hours are supplied by the six workers.)
• Welding supplies: $400 per job
• Welding hours: 4 hours used per job
During the year, the activity operated at 95 percent of capacity and incurred the following actual activity and resource costs.
• Lease cost: $60,000
• Salaries: $365,400
• Parts and supplies: $1,134,200
Required:
1. Prepare a flexible budget formula for the welding activity using welding hours as the driver.
Welding cost
=
$fill in the blank e95687f99006fa4_1
+
$fill in the blank e95687f99006fa4_2 X
2. Prepare a performance report for the welding activity. In the last column of Foy Company Activity-Based…
Activity-Based Flexible Budgeting
Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity:
• Four welding units, with a lease cost of $11,000 per year per unit
• Six welding employees each paid a salary of $51,000 per year (A total of 12,000 welding hours are supplied by the six workers.)
• Welding supplies: $400 per job
• Welding hours: 4 hours used per job
During the year, the activity operated at 85 percent of capacity and incurred the following actual activity and resource costs.
• Lease cost: $44,000
• Salaries: $321,300
• Parts and supplies: $1,014,900
1. Prepare a performance report for the welding activity. In the last column of Foy Company Activity-Based Performance Report, if variance amount is unfavorable select "U" , select "F", if it is Favorable and select "NA" if there is no variance.
Foy Company
Activity-Based Performance Report
Activity
Actual Cost
Budgeted Cost…
Triton Company's copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity of copies:
Salaries (fixed)
$95,000
Employee benefits (fixed)
10,000
Depreciation of copy machines (fixed)
10,000
Utilities (fixed)
5,000
Paper (variable, 1 cent per copy)
50,000
Toner (variable, 1 cent per copy)
50,000
The costs are assigned to two cost pools, one for fixed and one for variable costs. The costs are then assigned to the sales department and the administrative department. Fixed costs are assigned on a lump-sum basis, 40 percent to sales and 60 percent to administration. The variable costs are assigned at a rate of 2 cents per copy.
Assuming the following copies were made during the year, 2,788,250 for sales and 3,284,250 for administration, calculate the copy department costs allocated to sales.
Round to two decimal places.
Chapter 12 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 12 - What are the two dimensions of the activity-based...Ch. 12 - What is driver analysis? What role does it play in...Ch. 12 - What is activity analysis? Why is this approach...Ch. 12 - What are value-added activities? Value-added...Ch. 12 - What are non-value-added activities?...Ch. 12 - Identify and define four different ways to manage...Ch. 12 - What is a kaizen standard? Describe the kaizen and...Ch. 12 - Prob. 8DQCh. 12 - Prob. 9DQCh. 12 - Prob. 10DQ
Ch. 12 - Prob. 11DQCh. 12 - Prob. 12DQCh. 12 - Prob. 13DQCh. 12 - Describe a financial-based responsibility...Ch. 12 - Describe an activity-based responsibility...Ch. 12 - Cicleta Manufacturing has four activities:...Ch. 12 - Assume that at the beginning of 20x2, Cicleta...Ch. 12 - Gordon Company produces custom-made machine parts....Ch. 12 - Foy Company has a welding activity and wants to...Ch. 12 - Uchdorf Manufacturing just completed a study of...Ch. 12 - Harvey Company produces two models of blenders:...Ch. 12 - Prob. 7ECh. 12 - Thayne Company has 30 clerks that work in its...Ch. 12 - Suppose that clerical erroreither Thaynes or the...Ch. 12 - Refer to Exercise 12.8. Suppose that clerical...Ch. 12 - Prob. 11ECh. 12 - For Situations 1 through 6, provide the following...Ch. 12 - Maquina Company produces custom-made machine...Ch. 12 - Sanford, Inc., has developed value-added standards...Ch. 12 - Refer to Exercise 12.14. Suppose that for 20x2,...Ch. 12 - Jane Erickson, manager of an electronics division,...Ch. 12 - For each of the following situations, two...Ch. 12 - Which of the following are examples of...Ch. 12 - A company is spending 70,000 per year for...Ch. 12 - Which of the following is likely to be used to...Ch. 12 - Activity-based management includes both process...Ch. 12 - The activity of moving materials uses four...Ch. 12 - Joseph Fox, controller of Thorpe Company, has been...Ch. 12 - Baker, Inc., supplies wheels for a large bicycle...Ch. 12 - Novo, Inc., wants to develop an activity flexible...Ch. 12 - Prob. 26PCh. 12 - Tom Young, vice president of Dunn Company (a...Ch. 12 - Bienestar, Inc., has two plants that manufacture a...Ch. 12 - Kelly Gray, production manager, was upset with the...Ch. 12 - Douglas Davis, controller for Marston, Inc.,...
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