Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 4, Problem 4PA
Activity-based product costing
Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory
The activity bases identified for each activity are as follows:
The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:
Each product requires 40 minutes per unit of machine time.
Instructions
Determine the activity rate for each activity.
Determine the total and per-unit activity cost for all three products. Round to nearest cent.
Why aren’t the activity unit costs equal across all three products since they require the same machine time per unit?
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Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made
the following estimates of cost and activity in the company's five activity cost pools:
Activity Cost Pool
Labor-related
Purchase orders
Product testing
Template etching
General factory
Activity Cost Pool
Labor-related (DLHS)
Activity Measure
Product A
Product B
Product C
Product D
Direct labor-hours
Number of orders
Number of tests
Number of templates
Machine-hours
Total Overhead
Cost
Expected
Overhead
Cost
$ 30,115
$ 2,320
$ 6,930
$ 870
$ 65,100
2. The expected activity for the year was distributed among the company's four products as follows:
Product A
625
30
190
Expected Activity
1,585 DLHS
Product B
160
Purchase orders (orders)
190
Product testing (tests)
55
Template etching (templates)
17
3
General factory (MHS)
3,600
1,700
2,300
Using the ABC data, determine the total amount…
Lysiak Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs--equipment depreciation and supervisory expense-are allocated to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below:
Overhead costs:
Equipment depreciation
$
47,000
Supervisory expense
$
6,000
Distribution of Resource Consumption Across Activity Cost Pools:
Activity Cost Pools
Machining
Order Filling
Other
Equipment depreciation
0.60
0.10
0.30
Supervisory expense
0.60
0.20
0.20
In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:
Activity:
MHs (Machining)
Orders (Order Filling)
Product C9
6,900
200…
Activity-based product costing
Sweet Sugar Company manufactures three products (white sugar, brown sugar, and powdered sugar) in a continuous production
process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the
amount of factory overhead required by the critical activities of the organization as follows:
Activity
Production
Setup
Inspection
Shipping
Customer Service
Total
The activity bases identified for each activity are as follows:
Activity Base
Activity
Production
Setup
Inspection
Shipping
Customer
Service
Budgeted
Activity Cost
Machine hours
Number of setups
Number of inspections
Number of customer
orders
$418,900
298,900
85,800
112,000
91,700
$1,007,300
Number of customer
service requests
White sugar
Brown sugar
Powdered sugar
Total
The activity-base usage quantities and units produced for the three products were determined from corporate records and are as
follows:
3,120
1,990
1,990
7,100
Number
Number of…
Chapter 4 Solutions
Managerial Accounting
Ch. 4 - Why would management be concerned about the...Ch. 4 - Why would a manufacturing company with multiple...Ch. 4 - Prob. 3DQCh. 4 - Prob. 4DQCh. 4 - How does activity-based costing differ from the...Ch. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Under what circumstances might the activity-based...Ch. 4 - Prob. 9DQCh. 4 - Prob. 10DQ
Ch. 4 - Single plantwide factory overhead rate The total...Ch. 4 - Multiple production department factory overhead...Ch. 4 - Activity-based costing: factory overhead costs The...Ch. 4 - Activity-based costing: selling and administrative...Ch. 4 - Activity-based costing for a service business...Ch. 4 - Kennedy Appliance Inc.s Machining Department...Ch. 4 - Bach Instruments Inc. makes three musical...Ch. 4 - Scrumptious Snacks Inc. manufactures three types...Ch. 4 - Isaac Engines Inc. produces three productspistons,...Ch. 4 - Handy Leather, Inc., produces three sizes of...Ch. 4 - Eclipse Motor Company manufactures two types of...Ch. 4 - The management of Nova Industries Inc....Ch. 4 - Comfort Foods Inc. uses activity-based costing to...Ch. 4 - Nozama.com Inc. sells consumer electronics over...Ch. 4 - Hercules Inc. manufactures elliptical exercise...Ch. 4 - Lonsdale Inc. manufactures entry and dining room...Ch. 4 - Activity cost pools, activity rates, and product...Ch. 4 - Handbrain Inc. is considering a change to...Ch. 4 - Prob. 14ECh. 4 - Activity-based costing and product cost distortion...Ch. 4 - Prob. 16ECh. 4 - Evaluating selling and administrative cost...Ch. 4 - Prob. 18ECh. 4 - Prob. 19ECh. 4 - Activity-based costing for a service company...Ch. 4 - Bounce Back Insurance Company carries three major...Ch. 4 - Gwinnett County Chrome Company manufactures three...Ch. 4 - The management of Gwinnett County Chrome Company,...Ch. 4 - Activity-based and department rate product costing...Ch. 4 - Activity-based product costing Mello Manufacturing...Ch. 4 - Allocating selling and administrative expenses...Ch. 4 - Product costing and decision analysis for a...Ch. 4 - Single plantwide factory overhead rate Spotted Cow...Ch. 4 - Multiple production department factory overhead...Ch. 4 - Activity-based department rate product costing and...Ch. 4 - Activity-based product costing Sweet Sugar Company...Ch. 4 - Allocating selling and administrative expenses...Ch. 4 - Product costing and decision analysis for a...Ch. 4 - Life Force Fitness, Inc., assembles and sells...Ch. 4 - Prob. 2MADCh. 4 - Prob. 3MADCh. 4 - Production run size and activity improvement...Ch. 4 - Prob. 5MADCh. 4 - Ethics in Action The controller of Tri Con Global...Ch. 4 - Communication The controller of New Wave Sounds...Ch. 4 - Pelder Products Company manufactures two types of...Ch. 4 - The Chocolate Baker specializes in chocolate baked...Ch. 4 - Young Company is beginning operations and is...Ch. 4 - Cynthia Rogers, the cost accountant for Sanford...
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