1. Under the original (old) cost system: a. Compute the single indirect cost allocation rate that the bank would use to allocate the total indirect costs presented in Exhibit B. 2850 / 95000 = $0.03 b. Use your answer to part A to determine the total annual indirect cost assigned to: i. The retail customer line, and 9500 * 0.03 = $285 ii. The business customer line. What drives theses allocations? 85500 * 0.03 = $2565 Paying checks which was processed c. What proportion of the total indirect cost is assigned to: iii. The retail customer line, and iv. The business customer line? Why? That is, what is the underlying rationale for indirect cost allocation under the old …show more content…
2. What are the signs that Buckeye’s original cost system is “broken,” such that it needs refinement on improvement? Although the company made strategy through original cost system, it is still unclear why the profit was declining. Might be some problem when the company was allocating the cost on both lines, and the methods to allocate will route a wrong strategy for the company. 3. Under the new activity-based costing (ABC) system, compute the indirect cost allocation rates for each of the three activities: f. Paying checks: $700 +$440 = $1140 $1140 / 2850 = $0.4 per check processed g. Providing teller services: $1000 + 200 = $1200 $1200 / 200 = $6 per teller h. Responding to customer account inquiries: $450 + $60 = 510 $510 / 100 = $5.1 per call 4. Use the following schedule to compute the total indirect cost allocated to each customer line (show your computations beside the activity description) Activity | Total Indirect Cost Assigned to Retail Customer Line | Total Indirect Cost Assigned to Business Customer Line | Paying Checks | 0.4*570 = 228 | 0.4*2280 = 912 | Providing Teller Services | 6*160= 960 | 6*40 = 240 | Responding to customer account inquiries | 95*5.1=484.5 | 5.1*5 = 25.5 | Total Indirect Cost | $1672.5 | =1177.5 | 5. What proportion of each activity is attributable to: i. The retail customer line, and j. The business
indirect costs associated with obtaining a customer may be deferred and amortized over the revenue stream associated with that contract.” So instead of recognizing these expenses immediately, the portion of the unused capacity was able to be expensed later when the revenue was realized. This might have been an O.K. practice in accordance of GAAP if the capitalization of these line costs
14. If 11,000 units are produced, what are the total amounts of direct and indirect manufacturing costs incurred to support this level of production?
c) The present value of $500 to be received in one year when the opportunity cost rate is 8 percent (discounting):
A. The table below lists each category and states whether the cost is relevant, if it is an implicit or explicit cost, and if the cost has been properly calculated (note: company is currently operating at 65% capacity).
The Average Total Cost graph is the sum of average fixed cost plus average variable cost. The shape of the graph is a hybrid of the average fixed cost and average variable cost graphs. At any point on the X-axis, the plot for average total cost will equal the sum of average fixed cost plus average variable cost.
2.) For each expense that is variable with respect to revenue hours, calculate the cost per revenue hour.
Question 4.4. (TCO 3) Estimate the total variable cost (i.e., including both routine and ancillary) per MSDRG 505 using the departmental cost/charge ratios and variable
9. (Ignore income taxes in this problem.) The Crawford Company is pondering an investment in a machine that
Furthermore, there is costing system option is Activity Base Costing (ABC). ABC is a method to help with the concerns of properly allocated overhead costs. The main objective with ABC method the overhead cost will be assigned to different cost pools and then
The first cost system of this part of this essay is activity-based costing (ABC). Cooper and Kaplan (1988) implemented ABC for taking care of issues of Traditional costing frameworks.
Robert S. Kaplan and Robin Cooper was designed the activity based costing (ABC) method in 1988. It was felt that there was a need for more accurate and up-to-date information and a more proactive approach to planning and managing the costs. ABC is a process to identify the costs of all activities and allocating, applying, assigning or tracing costs to products. Activity based costing is a costing technique, tool, system, mechanism or approach. It may be used in addition to the current traditional system or used in place of it. This will enable the new system to be applied consistently so that the opportunity to revert to old ways is limited. Activity based costing is aims to cost the products independent of output volume and to apply
Cribb Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labor-hours were 17,900 hours and the total estimated manufacturing overhead was $341,890. At the end of the year, actual direct labor-hours for the year were 16,700 hours and the actual manufacturing overhead for the year was $336,890. Overhead at the end of the year was:
1. Explain the strategic role of activity-based costing 2. Describe activity-based costing (ABC), the steps in developing an ABC system, and the benefits and limitations of an ABC system 3. Determine product costs under both the volume-based method and the activity-based method and contrast the two 4. Explain activity-based management (ABM) 5. Describe how ABC/M is used in manufacturing companies, service companies, and governmental organizations 6. Use an activity-based approach to analyze customer profitability 7. Identify key factors for successful ABC/M implementation
* c. Total labor wages of $112,000 were incurred. Of this amount, $101,000 was for direct labor and the remainder was for indirect labor.