Question :
18) Brilliant Accents Company manufactures and sells three styles of : 1217199
18) Brilliant Accents Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of brass, chrome, and white faucets, respectively. The following additional data apply:
BRASSCHROMEWHITE
Projected sales in units30,00050,00040,000
PER UNIT data:
Selling price$40$20$30
Direct materials$ 8$ 4$ 8
Direct labor$15$ 3$ 9
Overhead cost based on direct labor hours
(traditional system)$12$ 3$ 9
Hours per 1000-unit batch:
Direct labor hours401030
Machine hours252510
Setup hours1.00.51.0
Inspection hours302020
Total overhead costs and activity levels for the year are estimated as follows:
ActivityOverhead costsActivity levels
Direct labor hours2,900 hours
Machine hours2,400 hours
Setups$465,50095 setup hours
Inspections$405,0002,700 inspection hours
$870,500
Required:
a.Using the traditional system, determine the operating profit per unit for the brass style of faucet.
b.Determine the activity-cost-driver rate for setup costs and inspection costs.
c.Using the ABC system, for the brass style of faucet:
1.compute the estimated overhead costs per unit.
2.compute the estimated operating profit per unit.
d.Explain the difference between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why?
19) Brilliant Accents Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture 1000-unit batches of brass, chrome and white faucets, respectively. The following additional data apply:
BRASSCHROMEWHITE
Projected sales in units30,00050,00040,000
PER UNIT data:
Selling price$40$20$30
Direct materials$ 8$ 4$ 8
Direct labor$15$ 3$ 9
Overhead cost based on direct labor hours
(traditional system)$12$ 3$ 9
Hours per 1000-unit batch:
Direct labor hours401030
Machine hours252510
Setup hours1.00.51.0
Inspection hours302020
Total overhead costs and activity levels for the year are estimated as follows:
ActivityOverhead costsActivity levels
Direct labor hours2,900 hours
Machine hours2,400 hours
Setups$465,50095 setup hours
Inspections$405,0002,700 inspection hours
$870,500
Required:
a.Using the traditional system, determine the operating profit per unit for each style of faucet.
b.Determine the activity-cost-driver rate for setup costs and inspection costs.
c.Using the ABC system, for each style of faucet
1.compute the estimated overhead costs per unit.
2.compute the estimated operating profit per unit.
d.Explain the differences between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why?
20) Aunt Ethel’s Fancy Cookie Company manufactures and sells three flavors of cookies: Macaroon, Sugar, and Buttercream. The batch size for the cookies is limited to 1,000 cookies based on the size of the ovens and cookie molds owned by the company. Based on budgetary projections, the information listed below is available:
MacaroonSugar Buttercream
Projected sales in units500,000800,000600,000
PER UNIT data:
Selling price$0.80$0.75$0.60
Direct materials$0.20$0.15$0.14
Direct labor$0.04$0.02$0.02
Hours per 1000-unit batch:
Direct labor hours211
Oven hours111
Packaging hours0.50.50.5
Total overhead costs and activity levels for the year are estimated as follows:
ActivityOverhead costsActivity levels
Direct labor 2,400 hours
Oven$210,0001,900 oven hours
Packaging$150,000950 packaging hours
$360,000
Required:
a.Determine the activity-cost-driver rate for packaging costs.
b.Using the ABC system, for the sugar cookie:
1.compute the estimated overhead costs per thousand cookies.
2.compute the estimated operating profit per thousand cookies.
c.Using a traditional system (with direct labor hours as the overhead allocation base), for the sugar cookie:.
1.compute the estimated overhead costs per thousand cookies.
2.compute the estimated operating profit per thousand cookies.
d.Explain the difference between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why?
