Ch 04 Solutions 3

Ch 04 Solutions 3 - 4 Cost Allocation and Activity-Based...

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Unformatted text preview: 4 Cost Allocation and Activity-Based Costing SOLUTIONS TO APPLY WHAT YOU HAVE LEARNED 4-5. a. OH Application Rate = Estimated Manufacturing OH Estimated Direct Labor Hours $11 /direct labor hour = $198,000 18,000 Prod A Cost Prod B Cost Direct Material $14,000 (14x1,000) $112,000 (14 x 8,000) Direct Labor 24,000 (24x1,000) 192,000 (24 x 8,000) Mfg. OH 22,000 (11x2x1,000) 176,000 (11 x 2 x 8,000) Total Cost $60,000 $480,000 Cost per Unit $60 (60,000/1,000) $60 (480,000/8,000) b. Application rate for setup costs = $50,400 = $12,600 per run 4 Application rate for other manufacturing costs: $8.20 /direct labor hour = $147,600 18,000 Prod A Cost Prod B Cost Direct Material $14,000 (14 x 1,000) $112,000 (14 x 8,000) Direct Labor 24,000 (24 x 1,000) 192,000 (24 x 8,000) Setup Costs 25,200 (12,600 x 2) 25,200 (12,600 x 2) Other Mfg. OH 16,400 (8.2 x 2 x 1,000) 131,200 (8.2 x 2 x 8,000) Total Cost $79,600 $460,400 Cost per Unit $79 .60 (79,600/1,000) $57 .55 (460,400/8,000) Chapter 4 Cost Allocation and Activity-Based Costing 88 4-5. (Continued) c. Activity-based costing would benefit Simple Products. The use of different application bases for setup costs and other manufacturing overhead costs produces more accurate product costs than would an allocation of all manufacturing overhead costs using a single allocation base. 4-6. a. OH Application Rate = Estimated Manufacturing OH Estimated Direct Labor Hours $25 /direct labor hour = $175,000 7,000 Prod C Cost Prod D Cost Direct Material $ 24,000 (24 x 1,000) $ 24,000 (24 x 1,000) Direct Labor 36,000 (36 x 1,000) 48,000 (48 x 1,000) Mfg. OH 75,000 (3 x 25 x 1,000) 100,000 (4 x 25 x 1,000) Total Cost $135,000 $172,000 Cost per Unit $135 (135,000/1,000) $172 (172,000/1,000) b. Application rate for setup costs = $52,000 = $13,000 per run 4 Application rate for engineering change costs: $3,250 / per change = $26,000 8 Application rate for other manufacturing costs: $13.8571 / direct labor hour = $97,000 7,000 Prod C Cost Prod D Cost Direct Material $ 24,000 (24 x 1,000) $ 24,000 (24 x 1,000) Direct Labor 36,000 (36 x 1,000) 48,000 (48 x 1,000) Setup Costs 26,000 (13,000 x 2) 26,000 (13,000 x 2) Engineering 19,500 (3,250 x 6) 6,500 (3,250 x 2) Other Mfg. OH 41,571 (13.8571 x 3 x 1,000) 55,428 (13.8571 x 4 x 1,000) Total Cost $147,071 $159,928 Cost per Unit $147 .07 (147,071/1,000) $159.93 (159,928/1,000) Chapter 4 Cost Allocation and Activity-Based Costing 89 4-6. (Continued) c. Activity-based costing would benefit Complex Products. The use of different application bases for various types of manufacturing overhead costs produces more accurate product costs than would an allocation of all manufacturing overhead costs using a single allocation base....
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Ch 04 Solutions 3 - 4 Cost Allocation and Activity-Based...

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