ACC 342 Lecture Notes - Lecture 9: Variable Cost, Gross Margin, Earnings Before Interest And Taxes
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Murri Corporation has an activity-based costing system withthree activity cost pools-Processing, Setting Up, and Other. Thecompany's overhead costs, which consist of factory utilities andindirect labor, are allocated to the cost pools in proportion tothe activity cost pools' consumption of resources. Costs in theProcessing cost pool are assigned to products based onmachine-hours (MHs) and costs in the Setting Up cost pool areassigned to products based on the number of batches. Costs in theOther cost pool are not assigned to products. Data concerning thetwo products and the company's costs and activity-based costingsystem appear below: |
| Factory utilities (total) | $ | 36,500 |
| Indirect labor (total) | $ | 11,000 |
| Distribution of Resources Consumption Across ActivityCost Pools | |||
| Processing | Settingup | Other | |
| Factoryutilities | 0.30 | 0.20 | 0.50 |
| Indirect labor | 0.50 | 0.30 | 0.20 |
| MHs | Batches | |
| Product X7 | 3,600 | 1,500 |
| Product L4 | 7,600 | 900 |
| Total | 11,200 | 2,400 |
| Product X7 | Product L4 | |||
| Sales (total) | $ | 70,900 | $ | 100,100 |
| Direct materials(total) | $ | 25,400 | $ | 37,500 |
| Direct labor(total) | $ | 32,400 | $ | 44,000 |
| Required: | |
| a. | Assign overhead costs to activity cost pools usingactivity-based costing. (Omit the "$" sign in yourresponse.) |
Activity Cost Pools | ||||||||
| Processing | Settingup | Other | Total | |||||
| Factoryutilities | $ | $ | $ | $ | ||||
| Indirect labor | ||||||||
| Total | $ | $ | $ | $ | ||||
| b. | Calculate activity rates for each activity cost pool usingactivity-based costing. (Round youranswers to 2 decimal places. Omitthe "$" sign in your response.) |
| ActivityRate | ||
| Processing | $ | per MH |
| Setting up | $ | per batch |
| c. | Determine the amount of overhead cost that would be assigned toeach product using activity-based costing. (Omit the "$"sign in your response.) |
| Product X7 | Product L4 | |
| Processing | $ | $ |
| Setting up | ||
| Total | $ | $ |
| d. | Determine the product margins for each product usingactivity-based costing. (Omit the "$" sign in yourresponse.) |
| Product Margin | |
| Product X7 | $ |
| Product L4 | $ |
7.
Murri Corporation has an activity-based costing system withthree activity cost pools-Processing, Setting Up, and Other. Thecompany's overhead costs, which consist of factory utilities andindirect labor, are allocated to the cost pools in proportion tothe activity cost pools' consumption of resources. Costs in theProcessing cost pool are assigned to products based onmachine-hours (MHs) and costs in the Setting Up cost pool areassigned to products based on the number of batches. Costs in theOther cost pool are not assigned to products. Data concerning thetwo products and the company's costs and activity-based costingsystem appear below: |
| Factory utilities (total) | $ | 34,200 |
| Indirect labor (total) | $ | 12,800 |
| Distribution of Resources Consumption Across ActivityCost Pools | |||
| Processing | Settingup | Other | |
| Factoryutilities | 0.40 | 0.30 | 0.30 |
| Indirect labor | 0.20 | 0.10 | 0.70 |
| MHs | Batches | |
| Product X7 | 3,700 | 1,300 |
| Product L4 | 7,700 | 700 |
| Total | 11,400 | 2,000 |
| Product X7 | Product L4 | |||
| Sales (total) | $ | 78,100 | $ | 101,700 |
| Direct materials(total) | $ | 22,800 | $ | 38,700 |
| Direct labor(total) | $ | 35,200 | $ | 41,300 |
| Required: | |
| a. | Assign overhead costs to activity cost pools usingactivity-based costing. (Omit the "$" sign in yourresponse.) |
Activity Cost Pools | ||||||||
| Processing | Settingup | Other | Total | |||||
| Factoryutilities | $ | $ | $ | $ | ||||
| Indirect labor | ||||||||
| Total | $ | $ | $ | $ | ||||
| b. | Calculate activity rates for each activity cost pool usingactivity-based costing. (Round youranswers to 2 decimal places. Omitthe "$" sign in your response.) |
| ActivityRate | ||
| Processing | $ | per MH |
| Setting up | $ | per batch |
| c. | Determine the amount of overhead cost that would be assigned toeach product using activity-based costing. (Omit the "$"sign in your response.) |
| Product X7 | Product L4 | |
| Processing | $ | $ |
| Setting up | ||
| Total | $ | $ |
| d. | Determine the product margins for each product usingactivity-based costing. (Omit the "$" sign in yourresponse.) |
| Product Margin | |
| Product X7 | $ |
| Product L4 | $ |
| Please show work Murri Corporation has an activity-based costing system withthree activity cost pools-Processing, Setting Up, and Other. Thecompany's overhead costs, which consist of factory utilities andindirect labor, are allocated to the cost pools in proportion tothe activity cost pools' consumption of resources. Costs in theProcessing cost pool are assigned to products based onmachine-hours (MHs) and costs in the Setting Up cost pool areassigned to products based on the number of batches. Costs in theOther cost pool are not assigned to products. Data concerning thetwo products and the company's costs and activity-based costingsystem appear below: |
| Factory utilities (total) | $ | 35,500 |
| Indirect labor (total) | $ | 9,600 |
| Distribution of Resources Consumption Across ActivityCost Pools | |||
| Processing | Settingup | Other | |
| Factoryutilities | 0.40 | 0.50 | 0.10 |
| Indirect labor | 0.40 | 0.20 | 0.40 |
| MHs | Batches | |
| Product X7 | 3,100 | 1,200 |
| Product L4 | 7,800 | 1,000 |
| Total | 10,900 | 2,200 |
| Product X7 | Product L4 | |||
| Sales (total) | $ | 79,500 | $ | 98,800 |
| Direct materials(total) | $ | 26,400 | $ | 33,500 |
| Direct labor(total) | $ | 36,200 | $ | 40,100 |
| Required: | |
| a. | Assign overhead costs to activity cost pools usingactivity-based costing. (Omit the "$" sign in yourresponse.) |
Activity Cost Pools | ||||||||
| Processing | Settingup | Other | Total | |||||
| Factoryutilities | $ | $ | $ | $ | ||||
| Indirect labor | ||||||||
| Total | $ | $ | $ | $ | ||||
| b. | Calculate activity rates for each activity cost pool usingactivity-based costing. (Round youranswers to 2 decimal places. Omitthe "$" sign in your response.) |
| ActivityRate | ||
| Processing | $ | per MH |
| Setting up | $ | per batch |
| c. | Determine the amount of overhead cost that would be assigned toeach product using activity-based costing. (Omit the "$"sign in your response.) |
| Product X7 | Product L4 | |
| Processing | $ | $ |
| Setting up | ||
| Total | $ | $ |
| d. | Determine the product margins for each product usingactivity-based costing. (Omit the "$" sign in yourresponse.) |
| Product Margin | |
| Product X7 | $ |
| Product L4 | $ |
