In the extreme unless performance reward systems are adjusted the firm will

In the extreme unless performance reward systems are

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In the extreme, unless performance reward systems are adjusted the firm will lose key people over the conflicts. Exercise 11.2 - Assign overhead costs using traditional absorption costing and ABC a. Activity Cost Pools Cost Drivers Estimated Overhead Cutting Machine hours \$400,000 Design Number of setups 555,000
Exercises ABC, TQM, JIT, BSC (Chapters 11 and 14) Group XA Cristiana Parisi 21.02.2020 6 Activity-based overhead rates: Cutting : \$400,000 ÷ 200,000 = \$2 per machine hour Design : \$555,000÷1,500=\$370 per setup Activity based costing: Wool Cotton Cutting 100,000*\$2 \$200,000 100,000*\$2 \$200,000 Design 1,000*\$370 370,000 500*\$370 185,000 Total cost allocated \$570,000 \$385,000 b. Estimated overhead ÷ Direct labour hours = \$955,000 ÷ 477,500 = \$2 per direct labour hour Traditional absorption costing system: 477,500÷2= 238,750 Wool Cotton 238,750* \$2 \$477,500 238,750* \$2 \$477,500 The wool product line is allocated \$92,500 (= \$570,000-\$477,500) more overhead cost when an activity-based costing system is used. As a result, the cotton product line is allocated \$92,500 (=\$477,500-\$385,000) less. Exercise 11.3 Honey Lake Summer Camp a. The average cost per camper using last year's last week of camp is \$244/camper. The total expected cost using that average cost is: (75 campers) (\$244/camper) = \$18,300
Exercises ABC, TQM, JIT, BSC (Chapters 11 and 14) Group XA Cristiana Parisi 21.02.2020 7 b. ABC recognizes how the costs would change with different uses of activities and changing numbers of campers. In particular: Weekly Cost Supervisor's salary \$400 Cook's salary 300 Camp counselor salaries (1 for each occupied cabin, each of which hold 10 campers) (8 counselors × \$200/counselor) 1,600 Food (75 campers × \$100/camper) 7,500 Supplies (75 campers × \$20/camper) 1,500 Utilities (75 campers × \$10/camper) 750 Insurance (75 campers × \$20/camper) 1,500 Property tax (\$10,000/10 weeks) 1,000 Weekly total \$14,550 Exercise 11.4 - Comparing traditional absorption cost systems with ABC a. Traditional absorption costing system: Direct materials \$ 55,500 Direct labour (820*\$18) 14,760 Overhead assigned (\$14,760*300%) 44,280 Total costs assigned to Slim-Way order \$114,540 Number of low-impact treadmills 150 Cost per unit \$763.60 b. Activity-based costing system: Direct materials \$ 55,500 Direct labour (820*\$18) 14,760 Overhead activities costs: Engineering design (330 hours @ \$30) \$9,900 Machine setup (22 setups @ \$200) 4,400 Machining (732 machine hours @ \$25) 18,300 Assembly (1,500 subassemblies @ \$8) 12,000 Packaging and shipping (152 hours @ \$15) 2,280 Building occupancy (732 hours @ \$6) 4,392 51,272 Total costs assigned to Slim- Way order \$121,532 Number of low-impact treadmills 150 Cost per unit \$ 810.21
Exercises ABC, TQM, JIT, BSC (Chapters 11 and 14) Group XA Cristiana Parisi 21.02.2020 8 c. Precor will likely adopt ABC because of the difference in the cost unit (with ABC found to be higher). More importantly, ABC provides greater insight into the sources and causes of the cost per unit. Managers are given greater insight into which activities to control in order to reduce costs. ABC will provide better product costing and greater profitability for the company. Chapter 14 – Exercises Exercise 14.1 - JIT and the Role of Accounting Accounting does not directly add value to the product or service purchased by the customer. Indirectly, however, the accounting function can reduce the cost of operations through better planning and control decisions. These reduced costs can be passed on to customers in the form of lower prices for products and services.

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• Fall '18
• XA Cristiana Parisi

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