Chapter_24_Solutions_7e

# Chapter_24_Solutions_7e - Chapter 24 Activity-Based Costing...

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Unformatted text preview: Chapter 24 Activity-Based Costing and Other Cost Management Tools √ Quick Check Answers: 1. d 3. d 5. d 7. a 9. b 2. b 4. a 6. c 8. a 10. b Explanations: 2. b. Kitting Boxing Estimated indirect cost of activity \$ 5 million \$ 10 million ÷ Estimated quantity of cost allocation base ÷ 500 million parts ÷ 20 million cubic feet Cost allocation rate for activity \$0.01 / part \$0.50 / cubic foot 3. d. Kitting Boxing Number of parts; number of cubic feet 100 parts 5 cubic feet × Cost allocation rate × \$0.01 / part × \$0.50 cubic feet Activity cost per desktop \$1.00 \$2.50 Chapter 24 Activity-Based Costing and Other Cost Management Tools 51 4. a. Revised kitting cost per desktop: Estimated cost of kitting (\$5 1.5 million) − \$ 3.5 million ÷ Estimated number of parts (500 400 million) − ÷ 100 million Revised cost allocation rate per desktop \$0.035 / part Desktop: 80 parts × \$0.035 / part = \$2.80 Accounting 7/e Solutions Manual 52 √ Short Exercises (5-10 min.) S 24-1 3 a. Compute the cost allocation rate for each activity. 2 b. Identify the cost driver for each activity and estimate the total quantity of each driver’s allocation base. 4 c. Allocate indirect costs to the cost object. 1 d. Identify each activity and estimate its total indirect cost. Chapter 24 Activity-Based Costing and Other Cost Management Tools 53 (10 min.) S 24-2 Req. 1 Cost per person = Total costs = \$1,100 = \$550 Number of people 2 Req. 2 Cost allocation rates: Food = \$500 / 50 pounds = \$10 per pound Skiing = \$300 / 3 lift tickets = \$100 per lift ticket Lodging = \$300 / 4 nights = \$75 per person per night Activities Allocation rate Bubba Roscoe Eating \$ 10 / pound × 20 \$200 × 30 \$300 Skiing \$100 / ticket × 3 300 × Lodging \$ 75 / per night × 2 150 × 2 150 \$650 \$450 Accounting 7/e Solutions Manual 54 (15 min.) S 24-3 Cost allocation rates: Setup = \$100,000 / 100 setups = \$1,000 per setup Machine maintenance = \$50,000 / 5,000 machine hours = \$10 per machine hour. ABC indirect manufacturing cost per unit: A B Setup \$1,000 × 30 \$30,000 × 70 \$ 70,000 Machine maintenance \$10 × 1,250 12,500 × 3,750 37,500 \$42,500 \$107,500 Divide by number of units 200 200 Indirect manufacturing cost per unit \$212.50 \$537.50 Chapter 24 Activity-Based Costing and Other Cost Management Tools 55 (15 min.) S 24-4 Req. 1 Cost allocation rates: Setup = \$50,000 / 40 setups = \$1,250 per setup Machine maintenance = \$30,000 / 3,000 machine hours = \$10 per machine hour ABC indirect manufacturing cost per unit: Lo-Gain Hi-Gain Setup \$1,250 × 20 \$25,000 × 20 \$ 25,000 Machine maintenance \$10 × 1,800 18,000 × 1,200 12,000 \$43,000 \$37,000 Divide by number of units 100 200 Indirect manufacturing cost per unit \$ 430 \$ 185 Accounting 7/e Solutions Manual 56 (15 min.) S 24-4 Req. 2 Cost allocation rates: Total indirect manufacturing costs / Total direct labor hours = \$80,000 / 4,000 direct labor hours = \$20 per direct labor hour Single-allocation base indirect manufacturing cost per unit: Lo-Gain \$20 per direct labor hour × 1,500 direct labor hours / 100 units =...
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Chapter_24_Solutions_7e - Chapter 24 Activity-Based Costing...

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