ACTG 2020 Chapter Notes - Chapter 7: Customer Satisfaction, Quality Costs, Activity-Based Costing

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ochrebat818

22 Mar 2016

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Chapter seven: activity based costing and management. Every acivity has a cost driver, a factor that drives or causes costs (ex: labour or machine costs, or they may relect the frequency of certain events such as a number of setups or kilometers driven) Product diversity: the situaion present when products consume overhead in diferent proporions. Consumpion raio: the proporion of an overhead acivity consumed by a product. From using either plantwide or departmental rates for assigning overhead costs, the problem that arises is the assumpion that unit-level drivers such as machine hours or direct labour hours drive (or cause) all overhead costs. The process of assigning overhead costs to various cost categories related to the natre of the acivity that causes (drives) these costs. Idenifying costs by the aciviies that drive them, we can more accurately assign these costs to the products being produced. The types of costs will be categorized as: unit-level, batch-level, product-sustaining, and facility- sustaining.

Related Questions

Which costing method assumes all products use overhead costs in the same proportions?

	All cost allocation methods
	Plantwide overhead rate method
	Activity-based costing
	Departmental overhead rate method

Which of the following would usually not be used in computing plantwide overhead rates?

	Direct labor dollars
	Number of quality inspections
	Machine hours
	Direct labor hours

With ABC, overhead costs should be traced to which cost object first?

	Departments
	Units of product
	Activities
	Product batches

bluewater-buffalo592

Foster Company has determined a raw materials cost of $0.10 perpound; their loaded labor rate is $15 per hour. The Controller forFoster Company has established the following overhead cost poolsand cost drivers:

Overhead Cost Pool	Budgeted Overhead Cost	Cost Driver
Machine setups	$150,000	Number of setups
Material handling	52,500	Pounds of raw material
Quality control inspection	37,500	Number of inspections
Other overhead costs	90,000	Machine hours
Total	$330,000

Overhead Cost Pool	Budgeted Level for Cost Driver	Compute ABC Overhead Rate
Machine setups	100 setups
Material handling	50,000 pounds
Quality control	1,000 inspections
Other overhead	15,000 machine hours
Order no. 610 has been received for 1,000 units of product. Ithas the following production requirements:
Direct Labor	20 hours
Machine setups	5 setups
Raw material	10,000 pounds
Inspections	12 inspections
Machine hours	600 machine hours

Required:

A. Compute the activity-based costing (ABC) rates for each ofthe four cost drivers; write answers in the table above. (4points)

B. Compute the total overhead that should be assigned to orderno. 610 by using activity-based costing. (4 points)

C. Suppose that Foster were to use a single, predeterminedoverhead rate based on machine hours. Compute the rate per hour andthe total overhead assigned to order no. 610. (4 points)

D. Compute the total product cost of one unitfor order no. 610, using activity-based costing rates. (4points

ivoryzebra335

Greenwood Company manufactures two productsâ15,000 units of Product Y and 7,000 units of Product Z. 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 Y and Z:

Activity Cost Pool Activity Measure Estimated Overhead Cost Expected Activity
Machining Machine-hours $ 221,100 11,000 MHs
Machine setups Number of setups $ 107,100 210 setups
Production design Number of products $ 85,000 2 products
General factory Direct labor-hours $ 251,000 10,000 DLHs

Activity Measure Product Y Product Z
Machining 7,100 3,900
Number of setups 60 150
Number of products 1 1
Direct labor-hours 8,100 1,900

2.
Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.)

3.
What is the activity rate for the Machining activity cost pool? (Round your answer to 2 decimal places.)

4.
What is the activity rate for the Machine Setups activity cost pool? (Round your answer to 2 decimal places.)

5.
What is the activity rate for the Product Design activity cost pool? (Round your answer to 2 decimal places.)

3.
What is the activity rate for the Machining activity cost pool? (Round your answer to 2 decimal places.)

4.
What is the activity rate for the Machine Setups activity cost pool? (Round your answer to 2 decimal places.)

5.
What is the activity rate for the Product Design activity cost pool? (Round your answer to 2 decimal places.)

6.
What is the activity rate for the General Factory activity cost pool? (Round your answer to 2 decimal places.)

.Which of the four activities is a batch-level activity? Machining activityGeneral factory activityProduct design activityMachine setups activity

Machining activity
General factory activity
Product design activity
Machine setups activity

8.Which of the four activities is a product-level activity? Machine setups activityMachining activityGeneral factory activityProduct design activity

Product design activity
Machining activity
Machine setups activity
General factory activity

9.
Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)

Total manufacturing overhead cost

.
10.Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)

Total manufacturing overhead cost

11.
Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y and Product Z? (Round your answers to 2 decimal places.)

Product Y Product Z
Total overhead cost
%
%
12.
Using the ABC system, what percentage of the Machining costs is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.)

Machining cost
%
%

13.
Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.)

Machine setups cost
%
%

14.
Using the ABC system, what percentage of the Product Design cost is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.)
Product Y Product Z
Product design cost
%
%

15.
Using the ABC system, what percentage of the General Factory cost is assigned to Product Y and Product Z? (Round your answers to 2 decimal places.)

General factory cost product Y% product z%

yellowwoodchuck103

ACTG 2020 Chapter Notes - Chapter 7: Customer Satisfaction, Quality Costs, Activity-Based Costing

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