Exercise 7-7 Eric Parker has been studying his department’s profitability reports for the past six months....
Exercise 7-7
Eric Parker has been studying his department’s profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company’s approach to allocating overhead to products based on machine hours. The current department overhead budget of $930,230 is based on 44,500 machine hours. In an initial analysis of overhead costs, Eric has identified the following activity cost pools.
| Cost Pool | Expected Cost | Expected Activities | ||||||
| Product assembly | $ | 400,500 | 44,500 | Machine hours | ||||
| Machine setup and calibration | 328,950 | 2,550 | setups | |||||
| Product inspection | 125,580 | 1,380 | batches | |||||
| Raw materials storage | 75,200 | 470,000 | pounds | |||||
| $ | 930,230 | |||||||
(a) Calculate the company’s overhead rate based on
machine hours. (Round answer to 2 decimal places, e.g.
15.25.)
| Overhead rate | $
|
(b) Calculate the company’s overhead rates using
the proposed activity-based costing pools. (Round
answers to 2 decimal places, e.g. 15.25.)
| Product assembly | $
|
||
| Machine setup and calibration | $
|
||
| Product inspection | $
|
||
| Raw materials storage | $
|
Homework Answers
| Ans. A | Predetermined overhead rate = Total expected overhead cost / Budgeted machine hours | |||||
| $930,230 / 44,500 | ||||||
| $20.90 per MH | ||||||
| Ans. B | Activity rate = Total cost / Total activity | |||||
| Activity cost pools | Expected Cost (a) | Expected activities (b) | Activity rate (a/b) | |||
| Product assembly | $400,500 | 44500 | $9.00 | Per machine hour | ||
| Machine setup and calibration | $328,950 | 2550 | $129.00 | Per setup | ||
| Product inspection | $125,580 | 1380 | $91.00 | Per batch | ||
| Raw materials storage | $75,200 | 470000 | $0.16 | Per pound | ||
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Exercise 7-7
Eric Parker has been studying his department’s profitability
reports for the past six months....
Eric Parker has been studying his department’s profitability reports for the past six months. He has...
Eric Parker has been studying his department’s profitability
reports for the past six months. He has just completed a managerial
accounting course and is beginning to question the company’s
approach to allocating overhead to products based on machine hours.
The current department overhead budget of $1,140,000 is based on
40,000 machine hours. In an initial analysis of overhead costs,
Eric has identified the following activity cost pools.
Cost Pool
Expected Cost
Expected
Activities
Product assembly
$
600,000
40,000
Machine hours...
Exercise 7-10 Eric Parker has been studying his department's profitability reports for the past six months....
Exercise 7-10 Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $1,140,000 is based on 40,000 machine hours. In an initial analysis of overhead costs, Eric has identified the following activity cost pools. Cost Pool Expected Cost Expected Activities Product assembly $ 600,000 40,000...
Exercise 7-10 Eric Parker has been studying his department's profitability reports for the past six months....
Exercise 7-10 Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $1,140,000 is based on 40,000 machine hours. In an initial analysis of overhead costs, Eric has identified the following activity cost pools. Cost Pool Product assembly Machine setup and calibration Product inspection Raw...
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Sheridan Machining makes three products. The company’s annual budget includes $1,104,300 of overhead. In the past, the company allocated overhead based on expected capacity of 40,000direct labor hours. The company recently implemented an activity-based costing system and has determined that overhead costs can be broken into four overhead pools: order processing, setups, milling, and shipping. The following is a summary of company information: Expected CostExpected ActivitiesOrder processing $283,900 17,000 orders Setups168,000 4,200 setups Milling 377,400 20,400 machine hours Shipping275,000 25,000...
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Exercise 7-6 Smith Machining makes three products. The company's annual budget includes $1,000,000 of overhead. In...
Exercise 7-6 Smith Machining makes three products. The company's annual budget includes $1,000,000 of overhead. In the past, the company allocated overhead based on expected capacity of 40,000 direct labor hours. The company recently implemented an activity-based costing system and has determined that overhead costs can be broken into four overhead pools: order processing, setups, milling, and shipping. The following is a summary of company information: Order processing Setups Milling Shipping Expected Cost $ 175,000 160,000 410,000 255,000 $ 1,000,000...
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Flynn Industries has three activity cost pools and two products. It estimates production 2,000 units of...
Flynn Industries has three activity cost pools and two products. It estimates production 2,000 units of Product BC113 and 1,000 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Flynn accumulated the following data relative to those activity cost pools and cost drivers. Annual Overhead Data Estimated Overhead $17,500 120,750 28,670 Activity Cost Pools Machine setup Machining Packing 20 Estimated Use of Cost Drivers per Product Estimated Use of Cost Product Product Drivers...
Eric Parker has been studying his department’s profitability
reports for the past six months. He has just completed a managerial
accounting course and is beginning to question the company’s
approach to allocating overhead to products based on machine hours.
The current department overhead budget of $1,140,000 is based on
40,000 machine hours. In an initial analysis of overhead costs,
Eric has identified the following activity cost pools.
Cost Pool
Expected Cost
Expected
Activities
Product assembly
$
600,000
40,000
Machine hours...
Exercise 7-10 Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $1,140,000 is based on 40,000 machine hours. In an initial analysis of overhead costs, Eric has identified the following activity cost pools. Cost Pool Expected Cost Expected Activities Product assembly $ 600,000 40,000...
Exercise 7-10 Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $1,140,000 is based on 40,000 machine hours. In an initial analysis of overhead costs, Eric has identified the following activity cost pools. Cost Pool Product assembly Machine setup and calibration Product inspection Raw...
ignment CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Exercise 7-9 Your answer is partially correct. Try again. Eric Parker has been studying his department's profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $810,495 is based on 38,500 machine hours. In an initial analysis of overhead costs, Eric Parker has identified...
Question 33 Vid-saver, Inc. has five activity cost pools and two products (a budget tape rewinder and a deluxe tape rewinder). Information is presented below Cost Drivers by Product Budget Deluxe Activity Cost Pool Ordering and Receiving Machine Setup Machining Assembly inspection Cost Driver Orders Setups Machine hours Parts Inspections Est. Overhead $ 110,000 297.000 1,000,000 1,200,000 300,000 500 150.000 1.200,000 550 100.000 800.000 450 Instructions Compute the overhead cost per unit for each product Production is 700,000 units of...
Exercise 7-6 Smith Machining makes three products. The company's annual budget includes $1,000,000 of overhead. In the past, the company allocated overhead based on expected capacity of 40,000 direct labor hours. The company recently implemented an activity-based costing system and has determined that overhead costs can be broken into four overhead pools: order processing, setups, milling, and shipping. The following is a summary of company information: Order processing Setups Milling Shipping Expected Cost $ 175,000 160,000 410,000 255,000 $ 1,000,000...
Flynn Industries has three activity cost pools and two products. It estimates production 2,000 units of Product BC113 and 1,000 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Flynn accumulated the following data relative to those activity cost pools and cost drivers. Annual Overhead Data Activity Cost Pools Machine setup Machining Packing Cost Drivers Setups Machine hours Orders Estimated Overhead $14,800 78,560 27,030 Estimated Use of Cost Drivers per Product Estimated Use...
Flynn Industries has three activity cost pools and two products. It estimates production 2,000 units of Product BC113 and 1,000 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Flynn accumulated the following data relative to those activity cost pools and cost drivers. Annual Overhead Data Estimated Overhead $17,500 120,750 28,670 Activity Cost Pools Machine setup Machining Packing 20 Estimated Use of Cost Drivers per Product Estimated Use of Cost Product Product Drivers...
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