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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