Porche, Incorporated, manufactures and sells two products: Product D4 and Product NO. Data concerning the expected production of each product and the expected total direct labor-hours (DLHS) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours 100 5.0 500 700 2.0 Product D4 Product NO Total direct labor-hours The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: 1,400 1,900 Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product D4 Product NO Total DLHS $ 32,414 setups 13,445 MHS 415,905 $461,764 Labor-related Machine setups Order size 500 300 4,200 1,400 1,900 200 500 4,300 8,500 The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to: O $44.82 per DLH O $67.23 per DLH O $17.06 per DLH O $923.53 per DLH

Porche, Incorporated, manufactures and sells two products: Product D4 and Product NO. Data concerning the expected production of each product and the expected total direct labor-hours (DLHS) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours 100 5.0 500 700 2.0 Product D4 Product NO Total direct labor-hours The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: 1,400 1,900 Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product D4 Product NO Total DLHS $ 32,414 setups 13,445 MHS 415,905 $461,764 Labor-related Machine setups Order size 500 300 4,200 1,400 1,900 200 500 4,300 8,500 The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to: O $44.82 per DLH O $67.23 per DLH O $17.06 per DLH O $923.53 per DLH

Financial & Managerial Accounting

14th Edition

ISBN:9781337119207

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter18: Activity-Based Costing

Section: Chapter Questions

Problem 2ADM

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PROBLEM 1 FIGHTING Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor hours (DLHs). The company has two products, H16Z and P25P, about which it has provided the following data: H16Z P25P Direct materials per unit P10.20 P50.50 Direct labor per unit P8.40 P25.20 Direct labor-hours per unit 0.40 1.20 Annual production 30,000 10,000 The company’s estimated total manufacturing overhead for the year is P1,464,480 and the company’s estimated total direct labor-hours for the year is 24,000. The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below: Activities and Activity Measures Estimated Overhead Cost Supporting direct labor (DLHs) P 552,000 Setting…
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Ayala Inc. has conducted the following analysis related to its product lines, using a traditional costing system (volume-based) and an activity-based costing system. Both the traditional and the activity-based costing systems include direct materials and direct labor costs. Products Product 540X Product 137Y Product 2495 Sales Revenue $208,000 155,000 92.000 Total Costs Traditional $54,000 48,000 23.000 ABC $49,000 30,000 46,000
Evaluating Selected Cost Driver Assume that a manufacturer of specialized machine parts developed the following total cost estimating equation for manufacturing costs. Y = $14,400 + $1,250 (actual units) a. What is total estimated manufacturing costs if 180 units are produced? $Answer 0
Question 1 XYZ Ltd. currently make and sells four products. They provide you with their details and relevant information for one period in the following table. As you have recently just learnt about activity-based costing (ABC) you decide to experiment by applying the principles of ABC to the four products. Product Outputs in Units Cost per unit Direct material Direct labour Machine hours (per unit) 4 A B C D 120 100 80 120 (£) (£) (£) (£) 40 50 30 60 28 21 14 21 3 2 3 The four products are similar and are usually produced in production runs of 20 units and sold in batches of 10 units. The production overhead is currently absorbed by using a machine hour rate, and the total of the production overhead for the period has been analysed as follows: Machine department costs (rent, business rates, depreciation and supervision) Set-up costs Stores receiving Inspection/Quality control Material handling and dispatch £10,430 £5,250 £3,600 £2,100 £4,620 Question continues on next page You have…
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Question 2 A. B. C. How does Activity-Based Costing differ from traditional costing? Identify any TWO (2) advantages and any TWO (2) limitations of Activity-Based Costing. (4 marks) McNish Enterprise manufactures and sells two products, Standard and Premium. The company uses the activity-based costing system to allocate its overhead costs. The following information has been collected relating to the SIX (6) overhead activities: Activity Purchase Orders Quality Control Material Handling Setup Cost Cost $ 400 500 $ 275 000 $ 150 000 $ 50 000 $ 125 000 $ 240 000 $1240 500 The activity-based usage quantities for each product are as follows: Production Scheduling Procurement Number of Setups Orders 900 1 600 (2 marks) Number of Inspection 500 500 Number of Orders Executed Standard 300 750 Premium 200 1 250 Total 500 2.500 2 000 1 000 The company produces 5 000 units of Standard and 4 000 units of Premium calculated in (i.) above. iii. Calculate the unit cost for each product. Required: i.…
Question 2 Answer the questions from the information provided. 2.1 Use the information given below to prepare the Income Statement for March 2022 according to the absorption costing method. INFORMATION The following information was extracted from the accounting records of Alpha Enterprises for the month ended 31 March 2022: Sales Selling price per unit Finished products on 01 March 2022 Products manufactured during the month Variable manufacturing costs per unit Variable selling and administrative costs per unit sold Fixed manufacturing costs Fixed selling and administrative costs Additional information 3 200 units R100 400 units 3 600 units R26 R12 R25 200 R12 400 The variable manufacturing cost per unit and total manufacturing cost per unit of the finished goods on 01 March 2022 was R21.60 and R26.20 respectively.
Problem 2 Milky Corporation has provided the following data from its activity-based costing accounting system: Activity Cost Pools Designing products Setting up batches Assembling products Total Cost P1,372,448 P33,300 P126,160 Total Activity 7,798 product design hours 740 batch set-ups 6,640 assembly hours The activity rate for the "designing products" activity cost pool is answer must be in nearest peso A The activity rate for the "setting up batches" activity cost pool is answer should be in nearest peso A The activity rate for the "assembling products" activity cost pool is answer must be in nearest peso A
Question No.1 Having the attention in ICMA course on activity based costing (ABC) you decide to experiment by applying the principle of ABC to the four products currently made and sold by your company. Details of the four products and relevant information are given below for one period; Product A B C D Output in units Cost per unit: 120 Rs. 100 Rs. 80 Rs. 120 Rs. Direct material Direct labor Machine hour per unit 40 28 4 50 21 3 30 14 2 60 21 3 The four products are similar and are usually produced in production runs of 20 units and sold in batches of 10 units. The production overheads are currently absorbed by using a machine hour rate the total of production overheads for the period are analyzed as follows: Machine department costs (rent, business rates, depreciation, and supervision) Setup costs Stores receiving Inspection / Quality control Material handling and dispatch Rs. 10,430 5,250 3,600 2,100 4,620 You have…
An allocation base: a. can be units of output if the company has a single product O b. is determined before the period begins. O c. All the given answers are correct. O d. can be direct labor cost e. is a measure used to assign manufacturing overhead costs to products and services PAGE NEXT PAGE IZ TWO Jump CQURSE OUTLINE_SPRING2021 ► tv MacBook Air