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Unformatted text preview: 4-23 Estimate the total monthly support costs for this checking account product. Traditional activity-based cost: VG Company has identified the following cost pools and cost drivers: COST POOLS ACTIVITY COSTS COST DRIVERS Machine setup $360,000 6,000 setup hours Materials handling 100,000 50,000 pounds of material Electric power 40,000 80,000 kilowatt-hours The following information pertains to the production of V203 and G179: ITEM V203 G179 Number of units produced 5,000 15,000 Direct materials cost 25,000 33,000 Direct labor cost 14,000 16,000 Number of setup hours 120 150 Pounds of materials used 5,000 10,000 Kilowatt-hours 2,000 3,000 Determine the unit cost for each of the two products using activity-based costing. 4-24 Traditional activity cost driver rates: Creathon Companys plant in Columbus, Ohio, manufactures two products: BR12 and BR15. Product BR15 has a more complex design and requires more setup time than BR12. Setups for BR12 require 2 hours on average; setups for BR15 require 3 hours. Creathons setup department employs 10 workers whose average wage is $10 per hours; fringe benefits cost 38% of wages. Other costs for setup activities amount to $25 per setup. Creathon plans to use all 10 workers for 40 hours each for the first 3 weeks of the winter quarter. The number of setups for these 3 weeks is as follow: _______Number of Setups____ Week BR12 BR15 1 85 75 2 90 70 3 80 80 A. Determine the actual setup activity cost driver rate for each week based on (1) the number of setups and (2) the number of setup hours. B. Is either of the two activity cost driver rates or some other rate appropriate in this case? Why? 4-25 traditional activity cost drivers identify a cost driver for costs for each of the following: A. Machine maintenance B. Machine setup C. Utilities D. Quality control E. Material ordering F. Production scheduling G. Factory depreciation H. Warehouse expense I. Production supervisors J. Payroll accounting K. Custodial service L. General and administration M. Customer inquiry responses N. Customer order processing O. Customer representative salaries 4-26 Capacity costs Kens Cornerspot, a popular university eatery in a competitive market, has seating and staff capacity to serve about 600 lunch customers every day. For the past 2 months, demand has fallen from its previous near-capacity level. Concerned about his declining profit, Ken decided to take a closer look at his costs. He concluded that food was the primary cost that varied with meals served; the remaining costs of $3,300 per day were fixed. With demand averaging 550 lunches per day for the past 2 months, Ken thought it was reasonable to divide the $3,300 fixed costs by the current average demand of 550 lunches to arrive at an estimate of $6 of support costs per meal...
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- Spring '11