revision New costsings

revision New costsings - New costing methods Question 1:...

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Accounting (Managerial) 530 Revision – New costing methods © Curtin Business School 1/10 New costing methods Question 1: The accountant for Scenic Photographic Supply Company has established the following overhead cost pools and activity drivers. Overhead Cost Budgeted overhead Pool Cost Activity Driver Machine set-ups $100,000 Number of setups Material handling $50,000 Weight of raw material Hazardous waste control 25,000 Weight of hazardous chemicals used Quality control inspection 37,500 Number of inspections Other overhead costs 100,000 Machine hours Total $312,500 Overhead Cost Pool Budgeted Level for activity Driver Overhead Rate Machine set-ups 100 $1,000 per setup Material handling 50,000 kilos $1 per kilo Hazardous waste control 10,000 kilos $2.50 per kilo Quality control inspection 1,000 $37.50 per inspection Other overhead costs 20,000 $5 per machine hour An order for 1,000 boxes of film development chemicals has the following production requirements:
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Accounting (Managerial) 530 Revision – New costing methods © Curtin Business School 2/10 Machine set-ups 4 Set-ups Raw material l0,000 kilos Hazardous materials 2,000 kilos Inspections 10 inspections Machine hours 500 machine hours REQUIRED: 1. Calculate the total overhead that should be assigned to the development chemical order. 2. What is the overhead cost per box of chemicals? 3. Suppose Scenic Photographic Supply Company were to use a single, predetermined overhead rate based on machine hours. Calculate the rate per hour. 4. Using the single plantwide rate, what is the total overhead assigned and the overhead cost per box of chemicals? 5. Discuss the merits of an activity-based overhead costing system.
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Accounting (Managerial) 530 Revision – New costing methods © Curtin Business School 3/10 Question 1 Solution: 1. Overhead to be assigned to film development chemical order: Assigned Overhead Cost Predetermined Level of Overhead Pool Overhead Rate Cost Driver Machine set-ups $1,000 per setup 4 setups 4,000 Material handling $1 per kilo 10,000 kilo 10,000 Hazardous waste control $2.50 per kilo 2,000 kilo 5,000 Quality Control $37.50 per inspection 10 inspections 375 Other overhead costs $5 per machine hour 500 machine hrs 2,500 Total $21,875 2. Overhead cost per box of chemicals $21,875/1,000 boxes = $21.875 per box 3. Predetermined Overhead = total budgeted overhead cost $312,500/total budgeted
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This note was uploaded on 09/19/2011 for the course ACCOUNTING 211 taught by Professor Min during the Three '11 term at Curtin.

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revision New costsings - New costing methods Question 1:...

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