Chapter 7B - Solution Manual

# Chapter 7B - Solution Manual - Chapter 07B Using a Modified...

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Chapter 07B Using a Modified Form of Activity-Based Costing to Determine Product Costs for External Reports Appendix 07B Using a Modified Form of Activity-Based Costing to  Determine Product Costs for External Reports Exercise 7B-1  (45 minutes) 1. The predetermined overhead rate is computed as follows: \$290,000 Predetermined    =    =  \$5.80 per DLH overhead rate 50,000 DLHs The unit product costs under the company’s traditional costing system are computed as follows: Delux e Standar d Direct materials. ................................................... \$60.0 0 \$45.00 Direct labor. ......................................................... 9.60 7.20 Manufacturing overhead (0.8 DLH × \$5.80 per DLH; 0.6  DLH × \$5.80 per DLH). .....................................       4    .64           3.48     Unit product cost. ................................................. \$74     .2     4    \$55.68 7B-1

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Chapter 07B Using a Modified Form of Activity-Based Costing to Determine Product Costs for External Reports Exercise 7B-1  (continued) 2. The activity rates are computed as follows: (a) Estimate d (b) Overhea d Total (a) ÷ (b) Activities Cost Expected  Activity Activity Rate Supporting direct labor. ... \$150,000 50,000 DLHs \$3 per DLH Batch setups. .................. \$60,000 250 setup s \$240 per setup Safety testing. ................. \$80,000 100 tests \$800 per test Manufacturing overhead is assigned to the two products as follows: Deluxe Product: Activity Cost Pool (a) Activity Rate (b) Activity  (a) × (b) ABC Cost Supporting direct labor. ........... \$3 per DLH 8,000 DLHs \$ 24,000 Batch setups. .......................... \$240 per setup 200 setups 48,000 Safety testing. ......................... \$800 per test 80 tests       64,000     Total. ....................................... \$136,000 Standard Product: Activity Cost Pool (a) Activity Rate (b) Activity  (a) × (b) ABC Cost 7B-2
Chapter 07B Using a Modified Form of Activity-Based Costing to Determine Product Costs for External Reports Supporting direct labor. ........... \$3 per DLH 42,000 DLHs \$126,000 Batch setups. .......................... \$240 per setup 50 setups 12,000 Safety testing. ......................... \$800 per test 20 tests       16,000     Total. ....................................... \$154,000 7B-3

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Chapter 07B Using a Modified Form of Activity-Based Costing to Determine Product Costs for External Reports Exercise 7B-1  (continued) Activity-based costing unit product costs are computed as follows: Deluxe Standar d Direct materials. ...................................................... \$60.00 \$45.00 Direct labor. ............................................................ 9.60 7.20 Manufacturing overhead (\$136,000 ÷ 10,000  units; \$154,000 ÷ 70,000 units). ..........................   13.60           2.20     Unit product cost. .................................................... \$83.20 \$54.40 7B-4
Chapter 07B Using a Modified Form of Activity-Based Costing to Determine Product Costs for External Reports Exercise 7-B2  (45 minutes) 1. The unit product costs under the company's conventional costing system would be computed as  follows: Mercon Wurcon Total Number of units produced (a). ..................... 10,000 40,000 Direct labor-hours per unit (b). .....................       0.20           0.25     Total direct labor-hours (a) × (b). .................   2,000     10,000 12,000 Total manufacturing overhead (a). ............... \$336,000 Total direct labor-hours (b). ......................... 12,000 DLHs Predetermined overhead rate (a) ÷ (b). ....... \$28.00 per DLH Mercon Wurcon  Direct materials. ........................................... \$10.00 \$ 8.00 Direct labor. ................................................. 3.00 3.75 Manufacturing overhead applied: 0.20 DLH per unit × \$28.00 per DLH. ....... 5.60 0.25 DLH per unit × \$28.00 per DLH. .......                      7.00     Unit product cost. ......................................... \$18.60 \$18.75 7B-5

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## This note was uploaded on 12/14/2011 for the course ACCOUNTING 2301 taught by Professor Sarah during the Fall '10 term at HCCS.

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Chapter 7B - Solution Manual - Chapter 07B Using a Modified...

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