Company Disney manufactures a variety of high-volume andlow-volume products to customer demand. Presented is information on2015 manufacturing overhead and activity cost drivers.
Level Total Cost Units of Cost Driver
Unit $600,000 20,000 machine hours
Batch 200,000 1,000 customer orders
Product 400,000 50 products
Product X1 required 3,000 machine hours to fill 10 customerorders for a total of 8,000 units
A. Assuming all manufacturingoverhead is estimated and predicted on the basis of machine hours,determine the predicted total overhead costs to produce the 8,000units of product X1.
B. Assuming manufacturing overhead is estimated and predictedusing separate rates for machine hours, customer orders, andproducts (a multiple-level cost hierarchy), determine the predictedtotal overhead costs to produce the 8,000 units of product X1.
C. Calculate the error in predicting manufacturing overheadusing machine hours versus using multiple cost drivers. Indicatewhether the use of only machine hours results in overpredicting orunderpredicting the costs to produce 8,000 units of product X1.
D. Determine the error in the prediction of X1 batch-level costsresulting from the use of only machine hours. Indicate whether theuse of only machine hours results in overpredicting orunderpredicting the batch-level costs of product X1
E. Determine the error in the prediction of X1 product-levelcosts resulting from the use of only machine hours. Indicatewhether the use of only machine hours results in overpredicting orunderpredicting the product-level costs of product X1.
Company Disney manufactures a variety of high-volume andlow-volume products to customer demand. Presented is information on2015 manufacturing overhead and activity cost drivers.
Level Total Cost Units of Cost Driver
Unit $600,000 20,000 machine hours
Batch 200,000 1,000 customer orders
Product 400,000 50 products
Product X1 required 3,000 machine hours to fill 10 customerorders for a total of 8,000 units
A. Assuming all manufacturingoverhead is estimated and predicted on the basis of machine hours,determine the predicted total overhead costs to produce the 8,000units of product X1.
B. Assuming manufacturing overhead is estimated and predictedusing separate rates for machine hours, customer orders, andproducts (a multiple-level cost hierarchy), determine the predictedtotal overhead costs to produce the 8,000 units of product X1.
C. Calculate the error in predicting manufacturing overheadusing machine hours versus using multiple cost drivers. Indicatewhether the use of only machine hours results in overpredicting orunderpredicting the costs to produce 8,000 units of product X1.
D. Determine the error in the prediction of X1 batch-level costsresulting from the use of only machine hours. Indicate whether theuse of only machine hours results in overpredicting orunderpredicting the batch-level costs of product X1
E. Determine the error in the prediction of X1 product-levelcosts resulting from the use of only machine hours. Indicatewhether the use of only machine hours results in overpredicting orunderpredicting the product-level costs of product X1.
Related questions
Lettuce Serve manufactures a variety of specialty salad dressings. Production runs are both high-volume and low-volume activities, depending on customer orders. Presented is Lettuce Serve's 2017 general manufacturing costs (manufacturing overhead) and each cost's related activity cost driver.
| Level | Total Cost | Units of Cost Driver | |
|---|---|---|---|
| Unit | $ 500,000 | 10,000 machine hours | |
| Batch | 50,000 | 500 customer orders | |
| Product | 100,000 | 25 products |
Their cranberry vinaigrette dressing required 3,000 machine hours to fill 10 customer orders for a total of 8,000 units.
(a) Assuming all manufacturing overhead is estimated and predicted on the basis of machine hours, determine the predicted total overhead costs to produce the 8,000 units of cranberry vinaigrette.
$Answer
(b) Assuming manufacturing overhead is estimated and predicted using separate rates for machine hours, customer orders, and products (a multiple-level cost hierarchy), determine the predicted total overhead costs to produce the 8,000 units of cranberry vinaigrette.
$Answer
(c) Calculate the error in predicting manufacturing overhead using machine hours versus using multiple cost drivers. Indicate whether the use of only machine hours results in overpredicting or underpredicting the costs to produce 8,000 units of cranberry vinaigrette.
$Answer
AnswerOver-predictionUnder-prediction
(d) Determine the error in the prediction of cranberry vinaigrette batch-level costs resulting from the use of only machine hours. Indicate whether the use of only machine hours results in overpredicting or underpredicting the batch-level costs of cranberry vinaigrette.
$Answer
AnswerOver-predictionUnder-prediction
(e) Determine the error in the prediction of cranberry vinaigrette product-level costs resulting from the use of only machine hours. Indicate whether the use of only machine hours results in overpredicting or underpredicting the product-level costs of cranberry vinaigrette.
$Answer
Answer
Thornton Company has determined its activity cost pools and cost drivers to be the following:
| Cost pools | |
| Setup | $ 45,000 |
| Material handling | 9,600 |
| Machine operation | 180,000 |
| Packing | 54,000 |
| Total indirect manufacturing costs | $ 288,600 |
| Cost drivers | |
| Setups | 500 |
| Material moves | 600 |
| Machine hours | 18,000 |
| Packing orders | 1,200 |
One product made by Thornton, metal casements, used the following activities during the period to produce 500 units:
| Setups | 40 |
| Material moves | 100 |
| Machine hours | 2,100 |
| Packing orders | 180 |
(a) Calculate the cost per unit of activity for each activity cost pool for Thornton company.
| Setup | $Answer |
| Material handling | $Answer |
| Machine operation | $Answer |
| Packing | $Answer |
(b) Calculate the manufacturing overhead cost per metal casement manufactured during the period. Round your answer to the nearest cent.
$Answer
