ACCY 202 Lecture Notes - Lecture 1: Activity-Based Costing, Snowmobile, Deutsche Luft Hansa
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1. | Which costing method assumes all products use overhead costs in the same proportions? | ||||||||
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2. | Which of the following would usually not be used in computing plantwide overhead rates? | ||||||||
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3. | With ABC, overhead costs should be traced to which cost object first? | ||||||||
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The 2nd time...****I just need the answers. Please round to the nearest cent****** Look at the numbers provided.
The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt:
1 | Fabrication Department factory overhead | $636,650.00 |
2 | Assembly Department factory overhead | 243,000.00 |
3 | Total | $879,650.00 |
Direct labor hours were estimated as follows:
Fabrication Department | 5,350 | hours |
Assembly Department | 5,400 | |
Total | 10,750 | hours |
In addition, the direct labor hours (dlh) used to produce a unit of each product in each department were determined from engineering records, as follows:
Production Departments | Gasoline Engine | Diesel Engine |
Fabrication Department | 2.9 dlh | 1.9 dlh |
Assembly Department | 1.9 | 2.9 |
Direct labor hours per unit | 4.8 dlh | 4.8 dlh |
Required: | |||||||||
a. | Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using direct labor hours as the activity base.* | ||||||||
b. | Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department.* | ||||||||
c. | (1) Recommend to management a product costing approach, based on your analyses in (a) and (b). (2) Give a reason for your answer. | ||||||||
*If required, round all per-unit answers to the nearest cent Single plantwide Method: a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using direct labor hours as the activity base . If required, round all per-direct labor hours and per-unit answers to the nearest cent.
Multiple production department method: b. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department. If required, round all per-unit answers to the nearest cent.
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Pineapple Motor Company manufactures two types of specialty electric motors, a commercial motor and a residential motor, through two production departments, Assembly and Testing. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering using the multiple production department factory overhead rate method. The following factory overhead was budgeted for Pineapple:
1 | Assembly Department | $360,000.00 |
2 | Testing Department | 900,000.00 |
3 | Total | $1,260,000.00 |
Direct machine hours were estimated as follows:
Assembly Department | 3,000 | hours |
Testing Department | 6,000 | |
Total | 9,000 | hours |
In addition, the direct machine hours (dmh) used to produce a unit of each product in each department were determined from engineering records, as follows:
Commercial | Residential | |
Assembly Department | 1.4 dmh | 1.1 dmh |
Testing Department | 2.8 | 2.2 |
Total machine hours per unit | 4.2 dmh | 3.3 dmh |
Required: | |
a. | Determine the per-unit factory overhead allocated to the commercial and residential motors under the single plantwide factory overhead rate method, using direct machine hours as the allocation base. |
b. | Determine the per-unit factory overhead allocated to the commercial and residential motors under the multiple production department factory overhead rate method, using direct machine hours as the allocation base for each department. |
c. | (1) Recommend to management a product costing approach, based on your analyses in (a) and (b). (2) Give a reason for your answer. |