Managerial Accounting
17th Edition
ISBN: 9781260247787
Author: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Publisher: RENT MCG
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Chapter 2.A, Problem 1E
EXERCISE 2A-1 Activity-Based Absorption Costing LO2-5
Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow:
| Direct Labor-Hours per Unit |
AnnualProduction | |
| Hubs | 0.80 | 10,000 units |
| Sprockets | 0.40 | 40,000 units |
Additional information about the company follows:
- Hubs require $32 in direct materials per unit and Sprockets require $18.
- The direct labor wage rate is $15 per hour.
- Hubs are more complex to manufacture than Sprockets and they require special processing.
- The company's activity-based absorption costing system has the following activity cost pools:
Expected Activity
| Activity Cost Pool (and Activity Measure) | EstimatedOverhead Cost | Hubs | Sprockets | Total |
| Machine setups (number of setups) | $72,000 |
100 | 300 | 400 |
| Special processing (machine-hours) | $200,000 | 5,000 | 0 | 5,000 |
| General factory (Direct labor-hours) | $816,000 | 8,000 | 16,000 | 24,000 |
Required:
- Compute the activity rate for each activity cost pool.
- Compute the unit product cost for Hubs and Sprockets using activity-based absorption costing.
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Chapter 6: A Closer Look on Cost Accounting
The company makes 2,350 units of product X a year, requiring a total os
3.300 machine hours, 250 orders and 200 inspection hours per year. The
product's direct material cost is P201.50 and its direct labor cost in
P211.11 per unit. The product sells for P590 per unit. According to the
activity-based costing system, the gross margin for product X is?
423,087.50
b. 350,435.50
c. 416,890
d. None of the choice
a.
56.
The following information is available for Mary Corp.
Activity Pool
Setups
Quality Inspections
Assembly (direct labor hour)
What is the activity rate for setups?
Activity Base
50,000
120,000
400,000
Budgeted Amount
300,000
600,000
2,000,000
a. P5.09
c. РО.75
d. P58.00
b. Рб.00
The activity rate for quality inspection is:
с. Рб.00
d. P5.09
a. P5.29
b. P5.00
Chhom Incorporated, manufactures and cells two products Product F and Product U4 Data concerning the expected production of each product and the expected total direct labor hours (DLH required to produce that output
appear below
Product F9
Product 04
Total direct labor-hoursi
Expected Direct Labor-Hours Total Direct
Production
300
600
Activity Cost Pools
Labor-related
Production orders
order size
Per Unit
4.0
2.0
The direct labor rate is $25.90 per DLH The direct materials cost per unit is $285 for Product F9 and $244 for Product 4
The company is considering adopting an activity based costing system with the following activity cost pools, activity measures, and expected activity
Activity
Measures
DLHS
orders
MHS
Estimated
Overhead Cost Product
$ 42,600
67,630
137,820
$ 248,050
Labor-Hours
1,200
1,200
2,400
1,200
400
3,300
Expected Activity
Product U
1,200
GOO
3,100
Total
2,400
1,000
4,400
QUESTION 2
Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow:
Direct Labor-Hours per Unit Annual Production
0.80
13,000
51,000
Hubs
Sprockets 0.40
Additional information about the company follows:
units
units
1. Hubs require $28 in direct materials per unit, and Sprockets require $12.
2. The direct labor wage rate is $12 per hour.
3. Hubs require special equipment and are more complex to manufacture than Sprockets.
4. The ABC system has the following activity cost pools:
Activity Cost Pool (Activity Measure)
Machine setups (number of setups)
Special processing (machine-hours)
General factory (organization-sustaining)
Estimated Overhead Cost
$ 33,930
$ 264,000
$ 398,000
Required:
1. Compute the activity rate for each activity cost pool.
2. Determine the unit product cost of each product according to the ABC system.
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Chapter 2 Solutions
Managerial Accounting
Ch. 2.A - EXERCISE 2A-1 Activity-Based Absorption Costing...Ch. 2.A - EXERCISE 2A-2 Activity-Based Absorption Costing as...Ch. 2.A - EXERCISE 2A-3 Activity-Based Absorption Costing as...Ch. 2.A - PROBLEM 2A-4 Activity-Based Absorption Costing as...Ch. 2.A - Prob. 5PCh. 2.A -
CASE 2A-6 Activity-Based Absorption Costing and...Ch. 2.B - EXERCISE 2B-1 Overhead Rate Based on Capacity...Ch. 2.B - EXERCISE 2B-2 Overhead Rates and Capacity Issues...Ch. 2.B - Prob. 3PCh. 2.B - Prob. 4C
Ch. 2 - Prob. 1QCh. 2 - What is absorption costing?Ch. 2 - What is normal costing?Ch. 2 - How is the unit product cost of a job calculated?
Ch. 2 - Explain the four-step process used to compute a...Ch. 2 - What is the purpose of the job cost sheet in a...Ch. 2 - Explain why some production costs must be assigned...Ch. 2 - Why do companies use predetermined overhead rates...Ch. 2 - What factors should be considered in selecting an...Ch. 2 - If a company fully allocates all of its overhead...Ch. 2 - Would you expect the amount of applied overhead...Ch. 2 - Prob. 12QCh. 2 - What is a plantwide overhead rate? Whyare multiple...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 3AECh. 2 - This Excel worksheet relates to the Dickson...Ch. 2 - Prob. 1F15Ch. 2 - Prob. 2F15Ch. 2 - Prob. 3F15Ch. 2 - Prob. 4F15Ch. 2 - Prob. 5F15Ch. 2 - Prob. 6F15Ch. 2 - Prob. 7F15Ch. 2 - Prob. 8F15Ch. 2 - Prob. 9F15Ch. 2 - Prob. 10F15Ch. 2 - Prob. 11F15Ch. 2 - Sweeten Company had no jobs in progress at the...Ch. 2 - Prob. 13F15Ch. 2 - Prob. 14F15Ch. 2 - Prob. 15F15Ch. 2 - EXERCISE 2-1 Compute a Predetermined Overhead Rate...Ch. 2 - Prob. 2ECh. 2 - EXERCISE 2–3 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 24 Computing Total Job Costs and Unit...Ch. 2 - EXERCISE 2-5 Computing Total Job Costs and Unit...Ch. 2 - Prob. 6ECh. 2 - EXERCISE 2-7 Job-Order Costing; Working Backwards...Ch. 2 - EXERCISE 2-8 Applying Overhead Cost; Computing...Ch. 2 - EXERCISE 2–9 Job-Order Costing and Decision Making...Ch. 2 - Prob. 10ECh. 2 - Prob. 11ECh. 2 - Prob. 12ECh. 2 - EXERCISE 2—13 Departmental Predetermined Overhead...Ch. 2 - EXERCISE 214 Job-Orders Costing for a Service...Ch. 2 - Prob. 15ECh. 2 - PROBLEM 2—16 Plantwide Predetermined Overhead...Ch. 2 - PROBLEM 217 Plantwide and Departmental...Ch. 2 - Prob. 18PCh. 2 - Prob. 19PCh. 2 - Prob. 20PCh. 2 - PROBLEM 2-21 Plant wide Versus Multiple...Ch. 2 - CASE 2-22 Plantwide versus Departmental Overhead...
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