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330 Chapter 2 A 1 Chapter Applying Excel Data Manufacturing whead Selling and administrative overhead Dat...

330 Chapter 2 A 1 Chapter Applying Excel Data Manufacturing whead Selling and administrative overhead Dat Ma Sel $500.000 530

Chapters 2 and 3? Nocating overhead in many companies? Lilient support and cross-functional involvement crucial when tional c

more frequently, but in smaller quantities per order. Enter the following data into your worksheet: Lets asume that Office M

330 Chapter 2 A 1 Chapter Applying Excel Data Manufacturing whead Selling and administrative overhead Dat Ma Sel $500.000 5300.000 Assembling Processing Supporting Orders Customers 50% 5% 10% 45% 25% 1 000 250 100 orders customers Other 10% 20% Ma Sel Tot 8 Manufacturing overhead Selling and administrative overhead 10 Total activity 11 12 13 OfficeMart oders 1 customer 14 Customers 4 orders 15 Orders 16 Number of filing cabinets ordered in total 80 units 17 Selling price $595 18 Direct matenals $180 19 Direct labor $50 20 21 Enter a formula ito each of the cele marked with a ? below 22 Review Problem: Activity Based Costing 23 24 Perform the first stage allocations Assembling Processing Supporting 25 Units Orders Customers 26 Manufacturing overhead ? 2 ? 27 Selling and administrative overhead ? ? ? 28 Total cost ? ? ? 29 30 Compute the activity rates 31 Activity Coat Pools Total Cost Total Activity 32 Assembling units 2 33 Processing orders 2 ? orders 34 Supporting customers 7 ? 35 ? customers On Cur Ord Tot Sel Dir Dir Totai Other ? ? 2 2 2 ? 3. 7 units Activity Rate ? per unit ? per order ? per customer ABC Cost 2 2 2 Mar Sell Tot 36 Compute the overhead cost attributable to the OfficeMart orders 37 Activity Cost Pools Activity Rate Activity 38 Assembling units 7 per unit 7 units 39 Processing orders ? per order 7 orders 40 Supporting customers 7 per customer 7 customer 41 42 Determine the customer margin for the OfficeMart orders under Activity-Based Costing 43 Sales 2 4 Costs 45 Direct materials 2 46 Direct labor 2 47 Unit-related overhead ? 48 Order-related overhead ? 49 Customer related overhead 2 ? 51 2 SO Customer margin Hicko Produ 52 Determine the product margin for the OfficeMart orders under a traditional cost system 53 Manufacturing overhead 2 54 Total activity 7 units 55 Manufacturing overhead per unit 7 per unit 56 57 Sales ? 58 Costs 59 Direct materials 2 60 Direct labor 61 Manufacturing overhead 2 62 Traditional costing product margin 63 ? Chapter 7 formed in perform Chapter Formula Source: Microsoft Excel sideri manus the co ? Activ Mach Mach Prode Gene
Chapters 2 and 3? Nocating overhead in many companies? Lilient support and cross-functional involvement crucial when tional costing sustaining activities? 7-6 interviews? 7-8 target process improvements? 7-10 Why is the form of activity-based costing described in this chapter unacceptable for connect The Excel worksheet form that appears below is to be used to recreate the Review Problem per- Applying Excel taining to Ferris Corporation. The workbook, and instructions on how to complete the file, can be L07-1, L07-2, L07-3, found in Connect. L07-4, L07-5 You should proceed to the requirements below only after completing your worksheet. Required: 1. Check your worksheet by doubling the units ordered in cell B16 to 160. The customer margin under activity-based costing should now be $7,640 and the traditional costing product margin should be $(21,600). If you do not get these results, find the errors in your worksheet and correct them. Why has the customer margin under activity-based costing more than doubled when the number of units ordered is doubled? b. Why has the traditional costing product margin exactly doubled from a loss of $10,800 to a loss of $21,600? Which costing system, activity-based costing or traditional costing, provides a more accu- rate picture of what happens to profits as the number of units ordered increases? Explain. a C. attempting to implement an activity-based costing system? What are unit-level, batch-level, product-level, customer-level, and organization 725 What types of costs should not be assigned to products in an activity-based costing system What are the two stages of allocation in activity-based costing? 7-7 Why is the first stage of the allocation process in activity-based costing often based on When activity-based costing is used, why do manufacturing overhead costs often shift from high-volume products to low-volume products? 7-9 How can the activity rates (i.e.. cost per activity) for the various activities be used to
more frequently, but in smaller quantities per order. Enter the following data into your worksheet: Let's asume that Office Mart places different orders next year, purchasing higher end filing cabinets Seding and administrative overhead Selling and administrative overhead Total number of filing cabinets ordered Activity-Based Costing: A Tool to Aid Decision Making Manufacturing overhead $500,000 $300,000 Assembling Units Processing Orders Supporting Customers Other Manufacturing overhead 50% 10% 1.000 units 35% 45% 250 orders 10% 20% Total activity 5% 25% 100 customers OfficeMart orders Customers Orders 1 customer 20 orders 80 units $795 $185 $90 Selling price Direct materials Direct labor b. What is the customer margin under activity-based costing? What is the product margin under the traditional cost system? C Explain why the profitability picture looks much different now than it did when OfficeMart was ordering less expensive filing cabinets less frequently, but in larger quantities per order. 3. Using the data you entered in part (2), change the percentage of selling and administrative overhead attributable to processing orders from 45% to 30% and the percentage attributable to supporting customers from 25% to 40%. That portion of the worksheet should look like this: Assembling Processing Supporting Orders Customers Units Other Manufacturing overhead Selling and administrative overhead Total activity... 10% 20% 50% 10% 1.000 units 35% 30% 250 orders 5% 40% 100 customers a. Relative to the results from part (2), what has happened to the customer margin under activity-based costing? Why? b. Relative to the results from part (2), what has happened to the product margin under the traditional cost system? Why?
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E F Others 10% 20% А B D 1 Data 2 Manufacturing Overheads $ 500,000 3 Selling and Administrative Overheads $ 300,000 4 AssembABC Cost $ 22,400 $ 4,960 $ 1,000 34 Compute the Overhead Cost attributable to the Office Mart Orders 35 Activity Cost Pools

Formulas :

А B D E F 21 22 Perform the First Stage Allocation Particulars Assembling Units Processing Orders Supporting Others Total 23=B15*B14 55 Sales 56 Costs : 57 Direct Materials 58 Direct Labor 59 Manufacturing Overheads 60 Traditional Costing Product Ma

Question 2

A B D E F Others 10% 20% 1 Data 2 Manufacturing Overheads $ 500,000 3 Selling and Administrative Overheads $ 300,000 4 ParticABC Cost $ 22,400 $ 24,800 $ 1,000 34 Compute the Overhead Cost attributable to the Office Mart Orders 35 Activity Cost Pools

Question 3

E F Others 10% 20% А B 1 Data 2 Manufacturing Overheads $ 500,000 3 Selling and Administrative Overheads $ 300,000 4 Assembli

ABC Cost $ 22,400 $ 21,200 $ 1,450 34 Compute the Overhead Cost attributable to the Office Mart Orders 35 Activity Cost Pools

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